Islamic Finance in Australia

Last year I had my first visit to Australia, which was only three nights long! As discussed below, it convinced me that Australia can become a major regional player in Islamic finance.

Monday - Conference

As a sign of the importance of the conference, it was opened by Nicholas Sherry, Assistant Treasurer of Australia. Also I was interviewed live on the lunchtime news programme of the ABC television channel.

After the live news, I also gave a recorded interview for the ABC Lateline Business show .

Tuesday - MCCA and a bank

The following day, I gave another interview at 0800 down the wire to TV presenter in Sydney (I never got to see the transmission) and then had a meeting at the Muslim Community Co-operative Australia. This body is a co-operative which promotes Islamic finance in Australia. MCCA's website shows their activities in asset management, and they are looking at other possible ventures.

As far as tax changes to accommodate Islamic finance are concerned, some progress has been made; for example in Australia stamp duty on land is a provincial tax, and Victoria has abolished the double stamp duty that would otherwise apply to Islamic mortgages, following in the footsteps of the UK changes made in 2003.

I also met with a bank who I cannot name to discuss their strategic approach to Islamic finance. While Australia has a relatively small Muslim community, I pointed out that the country has several competitive advantages which are not immediately obvious. Australia is politically far more stable than the other countries in the region (with the exception of New Zealand), has very low levels of corruption, has a reliable court system and a strong legal framework overall which gives certainty to contracting parties. It also has a strong conventional banking industry, with highly innovative investment bankers. All of these strengths will make Australia a strong competitor in international Islamic banking, asset management and international Islamic insurance once it chooses to compete in this space.

Wednesday - Government officials in Canberra

Along with John Masters, a partner from PwC Australia, I met with officials from the Australian Treasury, Australian Tax Office and the Department of Foreign Affairs and Trade. We covered the United Kingdom's approach to the introduction of Islamic finance, and in particular the way the UK has been able to introduce Islamic finance without bringing religion into the tax system. (See my website page British Government Policy on Islamic Finance.) I also outlined what I saw as Australia's competitive advantages as set out above.

The Australian government has subsequently produced a strategy paper on Islamic finance which was published in January 2010 under the auspices of the Australian Trade Commission (Austrade). John Masters and I assisted by reviewing a draft of the paper.

The bottom of Page 2 of the paper acknowledges the contribution of John Masters, and "Appendix A Explanation of key Islamic financial products and services" contains a number of diagrams which are properly attributed to an article written by me. In 40 pages the paper provides an excellent general introduction to the Islamic finance industry as well as outlining the areas where Australia could get involved. In turn other governments thinking about Islamic finance have found the Australia paper helpful.