The Islamic Finance market has an estimated market of around Rs 300 billion and with the operation of current five commercial licensed banks, three finance companies and other institutions,Sri Lanka’s total deposit base is nearly Rs 35 billion and the total loan base is Rs 24.8 billion,a top financial analyst said.
To tap a huge market potential of this size there is certainly much room for development in the Sri Lankan industry such as new products, product developments and liquidity and integrating with the country’s development needs, Head of Credit MCSL Financial Services Limited Leonard Perera said.
“It is essential that we raise funds and investments from the international markets. We have to search for new markets, institutions and entrepreneurs to open out channels to bring in investments to the country. Therefore Islamic Finance would be an ideal fund generator in the international markets,”Perera told the Daily News Business.
He further said that Islamic finance was one key opportunity, which we can make use of to bring in funds via different agencies, countries and foreign currencies. Introducing new Shariah-compliant instruments and bringing in our own new products are important in expanding the Islamic finance industry in the country, he said. The expansion in the banking, finance and insurance sector will not only assist to build the economy, but also to build the nation collectively,” he said.
Perera said Islamic finance industry is an ideal solution to the Sri Lankan market in order to enhance its banking, finance and insurance with different products and investments because Islamic Finance is not only to Muslims but also for every person. During the recent past the country has made remarkable progress in the Islamic finance industry and still has a huge market potential, he said.
“Sri Lanka can grow in the Islamic finance has lot of potential, but it is important that the industry has a plan and grow steadily. The thrust has to build among the public in taking the industry to the next level could be done since it could be distinguished from traditional banking system where its main advantage is it is risk free, interest free in interest asset and service backed and contractual certainty,’’he said.
Sri Lanka is one of the few non Islamic countries that available this business has a lot of potential in the market it is one of the growing sectors in the world, he said. According to industry sources that Islamic Financial sector has evolved and grown to reach US$ 1.3 trillion with a growth of 15 percent, which operates in 42 countries including15 non Islamic countries including USA, UK, Canada, and Switzerland Australia are top end countries that operate this instrument, he said. Perera said that major banks such as HSBC, Standard Chartered Bank ABN Amro have dedicated Islamic Banking subsidiaries or Islamic Banking windows, he said.
In Sri Lanka the Banking Act No 30 of 1988 was amended in March 2005 to accommodate the concepts of Islamic banking is recognized by IMF, World Bank, Basel Committee premier global bank regulator and funding body, he added.