Singapore's central bank said on Tuesday it would promote the issuance of local currency Islamic bonds or sukuks, by helping issuers price the securities against government bonds.
Heng Swee Keat, the managing director of the Monetary Authority of Singapore (MAS), said sukuks in Singapore would be issued on a reverse enquiry basis, or according to the needs of financial institutions in the country conducting Islamic finance, and would also be priced against Singapore government securities.
"This will provide a transparent price discovery mechanism for this new instrument. As the (Singapore dollar) sukuk market grows and deepens in time, it can then develop its own pricing benchmarks," said Heng in a statement issued by the central bank.
Heng was speaking at an Islamic finance conference in Jordan.
The MAS said it would provide more details about the scheme in due course.
Analysts said Singapore has struggled to attract big money into Islamic finance because it has been slow to move into the sector, and needs to do more to keep up with the likes of Malaysia, which has been more aggressive.
Singapore is located between Malaysia, which runs the world's biggest Islamic bond market, and Indonesia, the world's most populous Muslim country.
Bankers expect the issuance of global Islamic bonds to grow around 20 percent a year despite the credit squeeze, driven by petrodollars and infrastructure funding in Malaysia and the Middle East.
The sukuk market reached a record market value of $51.5 billion in 2007, the Islamic Finance Information Service.