Islamic Finance, Islamic Fund & Islamic Bank’s Future in Malaysia?

Eventhough some consider that Malaysia is not an Islamic country, or better of not trying not to be one, it seems the news that made into the news yesterday shows how Malaysia is so involved in matters that involves Islamic countries and the world at large.

First stop – Islamic Finance Opens Up Exciting Prospects For Further Linkages Between Muslim Countries.

BERNAMA reports:

ABU DHABI, April 27 (Bernama) — Islamic finance opens up exciting prospects for further linkages between Muslim countries, especially in terms of trade with the intra-trade level between countries still relatively low.

In addressing this, Raja Muda Perak Raja Dr Nazrin Shah said against this backdrop, Islamic finance is uniquely positioned to expand its role and presence.

Enormous opportunities remain for Muslim nations to increase trade with each other given that intra-OIC (Organisation of Islamic Conference) trade currently accounts for only between 10 to 13 per cent of the OIC’s global trade,” he said during a luncheon address here in conjunction with the Malaysia International Islamic Financial Centre (MIFC) roadshow.

The luncheon was co-hosted by MIFC and Standard Chartered Saadiq in conjunction with the MIFC roadshow to the United Arab Emirates and Saudi Arabia.

Raja Nazrin, who is the MIFC Financial Ambassador, said the industry also offered better prospects for developed economies to forge stronger financial linkages with Asian countries, including Malaysia.

“In the aftermath of the global financial crisis, there has been a heightened interest in Islamic finance as an alternative to conventional finance,” he said.

Raja Nazrin said the regulatory and legal frameworks for Islamic finance are already well established and the platforms for extending regional linkages and cross-border initiatives are also in place.

Citing Malaysia, he said the country has played an instrumental role at the international level in the design and implementation of a well-defined global financial architecture for Islamic finance.

Raja Nazrin said specific measures have also been implemented to enhance the competitiveness and efficiency of the Islamic financial services sector in Malaysia, including the implementation of tax neutrality measures, prompting other countries to follow suit.

With Malaysia’s strategic location, it could give advantage as a gateway to markets in East Asia, which represents a combined population of 1.6 billion, he said.

“The diversity of our people provides Malaysia with the unique ability to tap into various markets in the region,” said Raja Nazrin.

To this extent, he said that substantial scope existed for increased bilateral trade between Malaysia and the UAE.

Raja Nazrin said as the hub for Islamic finance in the Far East, corporations in the UAE are invited to invest in Malaysia while Malaysian companies are encouraged to invest in the UAE.

“Malaysia will benefit from greater diversification of products and services offered at competitive prices, while UAE investors can tap into the valuable economic opportunities in Malaysia and East Asia,” he said.

More than 150 companies from various sectors in the UAE attended the business networking lunch, which created linkages between the industry players from both countries.

The MIFC delegation, comprising over 50 members, involved key regulators, fund managers and industry players. 

For me, Islamic Finance is gaining trust from the market, not just from muslims, but also non-muslims. Therefore, if it is said that intra-trade between Muslims countries to be around 10 to 13 percent of the OIC global trade, the potential of growth in trading between muslims countries and the rest of the world using Islamic Finance as a medium of business transactions is great. Much can still can be explored and can be achieved. Since Malaysia is one of the example (by having multi-ethnics and multi-religion) to have growing Islamic Finance transactions, I verily believe that Islamic Finance can gain trust from the rest of Muslims countries and the world at large.

Second stop – Islamic Fund for Green Technology:

WASHINGTON, April 27 (Bernama) — Officials from the World Bank and the International Finance Corporation (IFC) will be in Kuala Lumpur next month to discuss the establishment of an Islamic financing facility for the green technology sector, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said here Monday.

The officials will be in Kuala Lumpur from May 10 for discussions with Bank Negara and the Ministry of Energy, Green Technology and Water to develop a suitable model in the creation of a syariah-compliant US$200 million fund.

The first Islamic fund of its kind in Asia, the financing facility would focus on the environmentally-friendly sector, he told Bernama in an interview following a series of meetings with World Bank and IFC officials, senior US officials and his counterparts from Iran and Egypt.

The minister wrapped up his working visit to Washington DC Monday after leading the Malaysian delegation to the International Monetary Fund (IMF) and World Bank Spring Meetings from April 23.

The IMF projected Malaysia’s GDP growth at 5.7 per cent in 2010 with growth in the new key targeted areas that include oil and gas, electrical and electronics, agriculture, tourism and financial services.

Husni said, in his meetings with top US officials and the American private sector, there was strong interest to establish closer US-Malaysia economic relations following Prime Mister Datuk Seri Najib Tun Razak’s working visit to the US recently.

“There is strong interest on the part of the US to develop closer relations with Asean in terms of trade and investment. In this context, Malaysia is viewed as a strategic partner of the US,” he said.

American companies seemed to be excited by Malaysia’s New Economic Model and viewed it as an impetus for new opportunities in various sectors including services, and the research and knowledge-based industries, Husni said.

He had meetings with Deputy US Trade Representative Demetrios Marantis, Treasury Under Secretary for International Affairs Lael Brainard, and Assistant Secretary of State for East Asia and Pacific Affairs Kurt Campbell, among others.

In his bilateral talks with his counterpart from Iran, Seyed Shamsuddin, they discussed ways to enhance trade and investment between Malaysia and Iran.

Husni said Iran wanted Malaysia to increase its investment in that country especially in Islamic banking and finance.

Meanwhile, the Egyptian Minister of Investment, Mahmoud Mohiedin was interested in a stronger Malaysia-Egypt collaboration in Islamic financing.

In Abu Dhabi, Raja Muda Perak Raja Dr Nazrin Shah addresed that Islamic finance is uniquely positioned to expand its role and presence. In the other part of the world, in Washington, it seems discussions have been carried out and subsequently will be further discussed in Malaysia on a creation of hefty a syariah-compliant US$200 million fund model.

These two development from different part of the world shows how big potential is for Malaysia and the world to explore and enjoy Islamic Finance that will benefit trade arrangements. If no one trying to screw Malaysia outside in his, her or their talks, I suppose that Malaysians can benefit from this development, be it muslims or non-muslims. Why do I include non-muslims? Clearly, Islamic Finance is not limited just to muslims, but also non-muslims. If not, why should Officials from the World Bank and the International Finance Corporation (IFC) be in Malaysia discussing about Islamic Funds? And I believe that non-muslims in Malaysia also have enjoyed the benefit in Islamic Finance in the business transactions. Right?

3rd stop – Islamic Bank Deposits In Labuan IBFC Rises 14.5 Per Cent To US$386.4 Million

KUALA LUMPUR, April 27 (Bernama) — Total deposits of full-pledged Islamic banks and Islamic windows of conventional banks operating in Labuan International Business and Financial Centre (IBFC) rose 14.5 per cent to US$386.4 million (US$1.00=RM3.18) as at Dec 31, 2009 from US$337.3 million in 2008.

There were six full-pledged Islamic banks and six Islamic windows of conventional banks operating during the period in Labuan IBFC, Labuan Financial Services Authority (Labuan FSA) said in its 2009 Annual Report released here today.

It said the year 2009 also recorded a significant increase in the non-resident deposits, where the bulk of the deposits were placed in institutions operating Islamic windows.

The placements by non-residents as at last year stood at US$135.1 million, an increase of 87.9 per cent from US$71.9 million in 2008.

Meanwhile, total Islamic financing fell slightly to US$226.4 million from US$231.4 million mainly due to the reduction of financing to residents.

Total Islamic assets also posted a slight decline last year, standing lower at US$794.7 million from US$957.3 million in 2008.

Labuan FSA said the Islamic capital market in Labuan IBFC grew modestly during the year reviewed after a landmark issuance of US$1.5 billion sukuk out of Labuan IBFC.

The sukuk, which was oversubscribed by 19 times and listed on the Labuan International Financial Exchange (LFX) highlighted that the Labuan IBFC remained a major centre for sukuk issuance.

There were a total of eight Islamic capital market instruments listed in LFX with a market capitalisation of US$6.0 billion which represented 33.1 per cent of market share of the industry.

The retakaful industry in Labuan IBFC also registered its third consecutive year of growth, exceeding 40 per cent by the end of 2009, with the total takaful and retakaful contributions posting an increase of 44.2 per cent in gross distributions amounting to US$234.1 million.

As at last year, there were five full-pledged retakaful companies, nine retakaful windows and 10 retakaful brokers in Labuan IBFC.

The total Islamic private funds in Labuan IBFC stood at US$3.2 billion with market share of 33.4 per cent.

During 2009, one trust company had been deregistered due to merger with another Labuan trust company, bringing the total number of registered trust companies to 22.

These companies posted an aggregate operating income of US$13.0 million, down by 11.2 per cent from US$14.6 million in the previous year.

Interestingly, eventhough there are some ups and downs, hundreds of millions USDs involved in Islamic Finance. The deposits and placements in Islamic Banks and transactions shows how confident the market is in Islamic Finance.

With these 3 news in one day, I suppose that this can be considered a positive indication on Islamic Finance in Malaysia. I also believe, the positive development should somehow benefited Malaysians.

The question is, how you are going to benefit from this development?


Trivia from OnDaStreet: Malaysia is one of OIC countries, chairing OIC for the moment, actively involved in Islamic issues.. but why do some still consider Malaysia not a muslim country? By what definition? If Malaysia is not an Islamic country, why should Malaysians be involved such?




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