DBS, Southeast Asia's largest bank and its Middle East partners will soon open Singapore's first Islamic bank supplying only shariah-compliant services, DBS said on Saturday.
DBS will be the majority shareholder in the joint venture, which will also have "prominent investors from the Persian Gulf Cooperation Council countries," its statement said.
These include six Arab states, including Bahrain, Saudi Arabia and Kuwait.DBS has engaged four leading Islamic finance scholars to advise it. Shariah law prohibits banks from charging interest on money and investing in companies associated with gambling, tobacco or alcohol.Other financial players such as Malaysia's Mayback offer Islamic products alongside conventional ones.
Chief executive Jackson Tai said, "There are great opportunities for DBS to grow its Islamic corporate banking services in Asia, the Middle East and elsewhere, The Straits Times said. He acknowledged the local market for retail banking products is limited."
DBS wants to play a "lead role in intermediating capital flows between Asian issuers and (Persian) Gulf investors," he was quoted as saying.
Its first foray into Islamic finance came last year. DBS was granted a licence to operate at the Dubai International Financial Centre and has opened a branch there.
DBS said, "The Monetary Authority of Singapore is prepared to grant a new bank licence to a DBS joint venture to set up the bank."
It will initially offer services for corporate, capital market and private banking clients.