Zeti: Sukuk important for financial linkages

KUALA LUMPUR: The importance of Islamic finance in strengthening financial linkages became evident with the emergence of sukuk instruments as an attractive new asset class for investors and a competitive form of financing for businesses.

In stating this, Bank Negara Malaysia governor, Tan Sri Dr Zeti Akhtar Aziz said the global sukuk market currently stood at almost US$130 billion, with an average annual growth rate of about 40 per cent.

“Having now become the most vibrant segment in Islamic finance, the sukuk market has evolved into a truly international market, generating significant cross-border flows as funds are raised from beyond

domestic financial markets,” she said at a luncheon address of the IMF-World Bank Annual Meetings in Washington DC on October 10.

Zeti also said the Malaysian sukuk market had attracted investors from across the globe.

“The issuance of Malaysia’s US$1.25 billion sovereign sukuk in May this year was six times oversubscribed with a wide investor base from Asia, the Middle East, Europe and the US, despite the prevailing volatile market conditions.

“As we pursue with stronger vigour, the agenda of balanced growth and development, we have the potential to leverage on the increased role of Islamic finance in contributing to global growth and financial stability,” she added.

In addition, she said, Islamic finance can be leveraged upon to foster greater financial flows

across borders to contribute towards the agenda of enhancing a mutually reinforcing growth and the development agenda to achieve global aspiration of a self-sustaining,

balanced and long lasting economic progress and development.

According to Zeti, Islamic finance, as a rapidly growing form of financial intermediation, had demonstrated its resilience during the global financial crisis with every potential to advance the growth and development agenda.

“As a form of financial intermediation, Islamic finance incorporates several elements, that guide the process of the mobilisation and allocation of funds to generate productive economic activity and inclusive development,” she said.

Zeti also highlighted that the internationalisation of Islamic finance has not only allowed for further diversification of risks, but also contributed to a more efficient allocation of funds across borders with a surplus to regions with investment opportunities.— Bernama

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