Islamic Banking

Co-op On Track To Become Australia's First Islamic Bank

Vanessa Doctor, Asia Editor, 10 September 2009

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Australia is fast joining the list of nations that support Shariah-compliant financial products, with the Muslim Community Co-operative announcing expansion plans into the country.

The co-op had already launched Australia's first retail shariah compliant mortgage income fund last month and aims to one day become the country's first Islamic bank.

Shariah rules state that all investments are to be made in accordance with Islamic law and that, while investments should be in the form of physical assets, the likes of gambling, alcohol and pornography are prohibited.

According to MCCA chief executive Chaabran Omran, the co-op's investment style will appeal to ethical investors. "Shariah compliance, like ethical investments, is linked to a moral code of conduct in doing business."

So far, the co-op has set up a mortgage fund in the country, which Mr Omran said should provide a steady stream of income with around 3 per cent to 4 per cent return. He also noted the vast potential for Islamic banking growth in Australia.

"The global market in this window is worth $1 trillion and is growing at a rate of about 15 per cent to 20 per cent, so if Australia can get, say, a 5 per cent slice in the next few years, then this would be a good starting point," he said.

The co-op, which has nearly 7500 member-owners said that the mortgage fund is its first step toward acquiring a banking license in the country, with demutualisation planned after about three years. After which, the company hopes to finally establish itself as an Islamic bank.

Islamic financial products had fared well during the global financial crisis because of their disconnection from debt markets.

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