WESTPAC is poised to bolster its exposure to the fast-growing Islamic finance market by offering a commodity trading facility intended for overseas investors operating under the principles of Islamic law.
Islamic finance prohibits the earning of interest. Instead, there is a focus on profit sharing based on the buying and selling of tangible assets such as property.
The move by Westpac, which targets Islamic institutions, coincides with a new emphasis by the Australian government on Islamic financing.
Trade Minister Simon Crean will today launch a study outlining opportunities for the nation's financial services sector to tap investment and banking markets that comply with Islamic law.
This comes on the heels of a recommendation last month by a government-backed finance taskforce that called for tax rules to be overhauled to ensure that Islamic financing products were given equal treatment.
The Australian Financial Centre Forum, which released a broader report into the nation's finance sector, highlighted Islamic financing as a potential funding source for the nation's banks.
The global market for Islamic financial services, which has grown rapidly in recent years backed by surging oil prices, is estimated to be worth close to $1 trillion.
The issue of sukuk - the Islamic alternative to conventional bonds - is in excess of $50 billion a year.
''Accessing this market could increase the diversity of the sources of capital available to Australian businesses and consumers,'' the Australian Financial Centre Forum said in its report.
Mr Crean said Islamic financing represented a key plank in the government's strategy to make Australia a financial hub in the Asia-Pacific region.
"Continued growth in major Asian economies will create a need for resources-related services and infrastructure, which are ideal assets for forms of Islamic financing," Mr Crean said.
All the major Australian banks now provide Islamic-style banking products for retail investors.
ERIC JOHNSTON
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