Korean Banks to tap oil money via Islamic finance

Korea Development Bank

Korean regulators are seeking to revise laws to help local banks and brokerages tap the fast-growing Islamic financial market. The Financial Services Commission is planning to develop ways to allow local firms to trade Islamic financial products by next month. It will hold a seminar on Islamic finance with the Islamic Financial Services Board, a Kuala Lumpur-based standard-setting organization, in Seoul next January.

Korean companies have been effectively banned from advancing into the capital market in the Middle East because of the Islamic regulatory regime. The Islamic law prohibits interest payments in financial transactions, so debtors pay quasi-interest in the form of dividends or commissions to lenders instead.

The complex rules conflict with Korean financial and accounting standards, making it difficult for Korean banks to tap Islamic markets. But local players have been eager to advance into the Islamic capital market chasing the region’s ample petrodollars.

Read: Korea Development Bank

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