Friday, August 29, 2008

Tax incentive in Malaysia, Pakistan sukuk

Malaysia announced tax breaks on fees and profits from the issuance of non-Ringgit sukuk for three yeras. The tax breaks were implemented to promote more sukuk issuance for international companies and distribution outside of Malaysia. Although Malaysia has one of the best developed sukuk market it is primarily concentrated on local issues & sold to domestic investors. Part of this is due to concerns about the Shari'ah-compliance of Malaysian sukuk, which are reviewed more liberally than those in the GCC. The government also introduced tax credits that make Islamic finance education more affordable to increase the number of Islamic finance professionals.

Pakistan is launching its first domestic rupee-denominated sukuk in September for PKR 15-20 billion ($197-263 million) with a coupon close to 11.49%. The structure of the bonds was not described.

Islamic finance in Malaysia continues to grow rapidly, according to Bernama. A few statistics from the release:
• Industry as a whole grew 12.6% to 177 billion Ringgit ($52 billion)
• Deposits grew 17% to 142.7 billion Ringgit ($42 billion)
• Islamic financing accounted for 14.2% of the total
• Takaful premiums grew 23% to 1.4 billion Ringgit ($412 million)

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