Financing Cambodia’s Muslims

[PHNOM PENH POST]

Islamic finance could help to boost trade between Cambodia and the Middle East, as well as attract investment from Muslim-majority countries, experts said on Saturday.

Knowledge of Islamic finance and banking, which bars interest lending and discourages unfair trade advantages, is almost nonexistent among Cambodia’s Muslims, which comprise about 2 per cent of the country’s population.

But demand for halal business practices is increasing in Malaysia and Middle Eastern countries, according to insiders.

With more education on Islamic law, domestic Muslims could dominate trade with those countries and attract investment from Islamic banks in the region, experts and Muslim business owners said.

“Most investors in the Middle East are certainly looking for Islamic-compliant business in countries that aren’t majority Muslim,” Ashraf Bin Md Hashim, head of consultancy at the International Shari’ah Research Academy for Islamic Finance, said on Saturday on the sidelines of Cambodia’s first conference on halal finance.

“This could open an Islamic banking window here.”

Progress on Islamic finance in Malaysia has been slow, Ashraf Bin Md Hashim said.

Banking without interest earnings has made for a difficult pitch to investors and much more time and fine tuning are needed to generate profits that adhere to the Quran, Islam’s holy text.

Still, 23 per cent of Malaysia’s banking sector and 80 per cent of its bond market comply with Islamic law, according to Ashraf Bin Md Hashim.

The Islamic Bank of Thailand is preparing to launch it first Islamic, or Sukuk, bond in Thailand.

An edge in trade with predominantly Muslim countries would be a boon for the Cham, a predominantly Muslim ethnic group in Cambodia, who generally have a lower standard of living than their Khmer countrymen, said Ahmad Yahya, a secretary of state at the Ministry of Social Affairs and a member of the Cham community.

“If we look at the Muslim population in Cambodia, we don’t have anything … In business, we have to start from the bottom. We need more resources,” he said on Saturday.

About 400,000 Cham live in Cambodia, the Post reported in August.

Islamic finance would most likely first appear in Cambodia in the form of microfinance, and there are plans to open a microfinance institution that would not collect interest on loans, Cambodian Intelligent Investor Organisation CEO Sles Nazy said.

The CIIO hosted Saturday’s conference.

Compliant MFIs would invest in small businesses and properties as opposed to lending money to investors.

Instead of earning interest from loans, the institutions would take a predetermined share of profit or loss.

Halal MFIs would also allow the Kingdom’s Muslims to live closer to Islamic Law, a resource that Sles Nazy said the community wants.

“There’s a demand from the Muslim community here. I have seen some problems because right now Muslims can’t follow Islamic law when they borrow money, even if they want to,” he said.

While some Cham attendees at Saturday’s conference expressed confusion over how they could take loans without paying interest, others said Islamic finance in Cambodia would benefit their businesses.

Mat Fasy, whose company imports halal food from Middle Eastern countries, said business between Cambodia and the Middle East is small at present but had potential to grow, especially in commodities trade such as rice and rubber.

An understanding of Islamic business practices is essential to furthering trade in the Middle East, according to Mat Fasy.

Muslim-run businesses in Cambodia could attract financing from Islamic banks in Southeast Asia if a better understanding of the practices was developed, said Sulaiman Muhammad, who imports halal food from Malaysia.

“Muslim companies in Cambodia are short on capital. If there was more Islamic finance here, Islamic banks in Malaysia might invest in our companies,” he said.