1. Islamic Finance and Opportunities for Australia's Financial Institutions Dr Ishaq Bhatti La Trobe University, Melbourne, Australia

2. Islamic Finance (IF) : An Overview Islamic finance is both a new and old phenomenon. While its guiding principles originate from the early days of Islam, the manifestation of Islamic finance and modus operandi under the current financial framework is new to many stakeholders, regulators, standard setting bodies, shareholders, practitioners and even the general Muslim population living in Australia and elsewhere. The new birth of modern Islamic finance took place in Dubai in 1975 through Dubai Islamic Bank as the first Islamic commercial bank in the world. Also, DIFC & DFSA played an important role in regulating IF within the region. In Australia, IF by Hon Nick Sherry, the Minister for Small Business who inaugurated the largest ever IF Symposium in 2009 Melbourne while launching 1 st ever MIBF postgraduate programme – La Trobe University

4. IF Potential & Facts The world’s Muslim population is expected to increase by 35% in next 20 years (1.6 - 2.2 billion by 2030) – {Pew Research Centre's Forum on Religion & Public Life} Muslims will make up 26.4% of the world’s total projected population of 8.3 billion in 2030, up from 23.4% of the estimated 2010 world population of 6.9 billion. (Ibid) Islamic Banks will account for 40% to 50% of total savings of Muslim Population worldwide in 8-10 years. (KPMG) Assets held by Islamic financial institutions may rise five- fold to more than $5 trillion. (Moody’s Investors Service) Australia’s geo-political location, resources, financial experts – Historically capital import

7. Islamic Banking and Finance in Australia

8. Why Australia?

10. $700b Shortfall A recent finding of the Infrastructure Partnership Australia report identifies severe constraints for Australian industry in securing debt for large infrastructure projects. The report warns that "If not acted upon soon, capacity constraints on existing infrastructure will significantly limit economic activity and restrict growth, adversely impacting our potential for economic recovery and productivity improvement", with more than 160 critical projects and the shortfall of over $700 billion, major projects in their advanced stages of planning are already facing delays.

21. IF - Review of the present situation in Australia With an estimated size of $1.4 trillion, Islamic banking is predicted to grow at 10% per annum. Major financial institutions such as Citibank, JP Morgan/Chase, Goldman Sache, USB, HSBC, ABN Amro, BNP Paribas, Societe Generale, Deutsche Bank, Nomura Securities and many more are capitalising on this growth opportunity. Since Islamic financial products must be linked with tangible assets and real economic activities, Australia’s resource related services and infrastructure creates a superb opportunity. Moreover, its geographic position and close proximity to the 972.5 million Muslims in Asia Pacific region are amongst primary drivers behind the move to position Australia as a financial centre in the Asia Pacific region (Austrade 2010 launched by Hon Minister Simon Crene).

22. Review of the present situation in Australia The Australian Financial Centre Forum’s report entitled “Australia as a Financial Centre - Building on our Strengths” or as commonly referred as - The Johnson Report - identified the Middle East as the major global source for offshore capital due to its booming oil exports. The capital intensive nature of Australia’s’ resources related services and infrastructure (Agribusiness, Mineral resources, property, Oil and Gas) in addition to Islamic finance which works mainly with assets, services and projects, creates prospects for future partnership (Austrade 2010, The Johnson Report 2009).

23. The Johnson Report Recommendations 3.6 & 4.8 Issue: Lack of Islamic finance products in Australia is limiting our access to offshore savings pools. Recommendation 3.6: Islamic finance products The Forum recommends that the Treasurer refer to the Board of Taxation the question of whether any amendments to existing Commonwealth taxation provisions are necessary in order to ensure that Islamic finance products have parity of treatment with conventional products, having regard to their economic substance. Recommendation 4.8: Removal of regulatory barriers to Islamic finance The Forum recommends the removal of any regulatory barriers to the development of Islamic financial products in Australia, guided by the principle that there should be a ‘level playing field’ for such products. Earlier situation

24. "The Road Less Travelled“ (now I know why) Oh! No! Stamp duty – AGAIN!!! What! Double GST??? Ha-ha! Nice and easy! No uncertainty… After all this NO deductions on profit 

25. Discussion Paper: The Board of Taxation (Board) review of the taxation treatment of Islamic finance products The purpose of this discussion paper is to: Examines the current approach to finance taxation in Australia; Identifies issues associated with Australia’s current approach to the taxation of Islamic finance products; and Examines the tax policy response to the development of Islamic finance products in other jurisdictions.

26. "The rapid growth in Islamic Finance, and the response by both the Australian authorities and the finance industry, points towards a growing demand for trained professionals in this area. Here, at La Trobe University, we will continue to understand the needs of the industry, and to play a positive and supportive role as it continues to grow and develop.“ Professor Leigh Drake Dean, Faculty of Law and Management

27. Current programs  Master of Islamic Banking and Finance LMIBF (1.5 yrs)  Master of Financial Analysis (Islamic finance) (2 yrs)  The Islamic Finance Professional Development (IFPD) Course (6 weeks, Next intake July 2011)

28. Questions?