Toyota considers Shariah bond to help Malaysian business

Toyota is considering issuing a bond that complies with Islamic law to help its expanding business in Malaysia, a company spokeswoman said.

The Malaysian financial authorities have given UMW Toyota Capital, based in Petaling Jaya, Malaysia, permission to issue up to 1 billion Malaysian ringgit, or $312 million, in Islamic bonds.

Under Shariah, or Islamic law, interest is banned and purchasers of Islamic bonds, or sukuk, instead would receive a dividend from UMW Toyota Capital.

"We are looking to issue Islamic bonds with a view to expanding our loan and lease business in Malaysia," said Mio Sugito, an assistant manager at Toyota Financial Services. "We are considering when to issue, and could go ahead as early as this month."

The company began offering Islamic loans in Malaysia in November 2005, and it started leases in August 2007, using cash borrowed from banks under Islamic law.

Apart from reducing the dependence on bank loans, the move would make it easier for local people to take out a loan with the company, Sugito said.

This would be the first time Toyota has raised money using Islamic finance.