Islamic banking, finance on a roll

Sector to continue expanding next year despite global financial woes
KUALA
LUMPUR: Despite the global financial crisis, Islamic banking and
finance is expected to continue expanding next year, with Malaysia-based
players ready to lead the pack regionally and internationally.
The
flaws in conventional finance have created great interest in the
Islamic financial model, and this provides the basis for the industry to
sustain a period of strong growth for the rest of this decade.
Dubai-based Noor Investment Group
chief executive officer, Hussain Al Qemzi, said the high level of
infrastructure spending in both Asean and the Middle East offers Islamic
finance an opportunity to establish itself strongly in the global
financial market, especially with the eurozone crisis that has certainly
depressed the European banks' appetite for financing infrastructure
projects.
“Islamic finance has not stopped growing despite all
the crises. I think 2012 would be a much better year, especially in the
sukuk market, which is expected to rebound once the issues in the Middle
East have settled down,” he told Bernama in an interview.
Malaysia
is already one of the largest sukuk (Islamic bond) issuance centres in
the world and has established Islamic finance institutions well governed
by trusted bodies like the International Islamic Liquidity Management Corp.
CIMB Islamic Bank Bhd chief executive officer Badlisyah Abdul Ghani
was reported as saying a total of US$25bil-US$30bil worth of new sukuk
issuances are expected to be issued in Malaysia next year.
Meanwhile, Amanie Advisors Sdn Bhd,
an Islamic finance consultancy, earlier said the Malaysian sukuk market
will see more ringgit-denominated sukuk issuance by investors from
Europe and Gulf Cooperation Council countries next year.
Amanie director Baiza Bain
said this would result in an increase of up to 67% in Malaysia's
contribution to global sukuk issuance. Malaysia contributed 62.7%, or
US$179.1bil, to global sukuk issuance as of the first half of 2011 with
Islamic banking assets worth RM389.3bil as at end-July, 2011.
Baiza
said the eurozone sovereign debt crisis, which was expected to deepen
next year, would provide more opportunities for the local sukuk market,
as it would be seen as an alternative.
Meanwhile, on the domestic
front, the market share of Malaysia's Islamic banking assets of the
total banking industry is expected to increase to 25% next year.
Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz
announced that the market share of Islamic banking assets of the total
banking industry had grown from only 6.9% in 2000 to 22% in 2011.
She
said the contribution of Islamic finance to the Malaysian economy had
also been growing significantly, accounting for 2.1% of the country's
gross domestic product in 2009, compared with only 0.3% in 2000.
Zeti
said greater liberalisation of the Islamic financial system had seen
greater foreign presence and participation in Malaysia's Islamic
financial system.
There had also been an increasing trend in
foreign participation in the domestic Islamic banking and takaful
industry, as well as the Islamic capital market, she said.
“Moving
forward, Islamic financial institutions in Malaysia will also expand
beyond national boundaries to increase economic and financial linkages
with other parts of the world,” she added.
To optimise the
country's potential as a global Islamic financial market platform, the
central bank will develop Malaysia as an international platform for the
listing and trading of syariah-compliant asset classes, according to the
Financial Sector Blueprint 2011-2020 released recently.
Bank Negara said efforts would be focused on intensifying the internationalisation of Islamic finance.
Malaysia's
expertise in Islamic banking and finance is recognised globally. The
country is currently the major hub of Islamic finance accounting for
nearly 63% of syariah-compliant debt sales globally.
Eight local banks were ranked in the top 50 in the Top 500 Islamic Financial Institutions 2011 Report recently.
The banks are Bank Rakyat (ranked 12th), Maybank Islamic (18th), CIMB Islamic Bank (22nd), Bank Islam Malaysia Bhd (24th), Public Bank Islamic Bhd (38th), AMMB Holdings (43rd), AmIslamic Bank Bhd (44th) and Bank Muamalat Malaysia Bhd (48th). - Bernama