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Bank of Tokyo-Mitsubishi UFJ opens Islamic finance business in Dubai
[SYDNEY] Japan's Bank of Tokyo-Mitsubishi UFJ (BTMU) has launched its Islamic finance business in Dubai, to focus on sharia-compliant loan syndications with later plans to offer project financing, a bank official said.
Large Asian lenders from China to Japan are increasingly interested in Islamic finance as a way to tap large pools of liquidity in southeast Asia and the Gulf.
In July, BTMU received approval from the Dubai Financial Services Authority to operate an Islamic window, which it plans to use as a hub for the wider region, said Shichito Tobari, BTMU's regional head for the Middle East.
Islamic windows allow conventional banks to conduct Islamic finance by segregating assets from conventional interest-bearing funds, an approach popularised by Western banks such as HSBC and Standard Chartered.
BTMU will initially target commercial loans and trade finance equivalent services, leveraging its existing client base of government-related entities, Mr Tobari said.
"Our intention is to extend finance on a case by case basis and participate in syndications," said Mr Tobari, adding that BTMU could extend between US$50 million to US$200 million in financing as part of those transactions.
A growing role in Islamic finance of Japanese lenders, traditional heavyweights in project financing, coincides with an industry push to facilitate large-scale infrastructure deals.
BTMU is the banking arm of Mitsubishi UFJ Financial Group, which has US$2.4 trillion in assets. "The next step is to expand the product line to ijara and istisna. The first half of 2016 is a target to deliver this." Ijara is a common sharia-compliant sale and lease-back contract, while istisna is a manufacturing contract in which a price is paid for goods that are subsequently manufactured and delivered at a later date.
In 2008, BTMU's Malaysia unit set up an in-house sharia board and since then has completed sharia-compliant financing deals in Malaysia, Singapore, Brunei and Indonesia.
In September last year, BTMU became the first Japanese commercial bank to issue sukuk via its Malaysia unit.