KUCHING: The existence of healthy competition in the local Islamic banking sector – not just among Malaysian players but also between international Islamic banks operating here – proves to be the right push for growth for industry peers.
According to Ernst & Young Malaysia’s (E&Y) director of Assurance Services, Syarizal Rahim, competition for market share has indeed provided the incentive for local players to continue developing more innovative products that would appeal to the greater population.
It also ensured that players would sustain the competitiveness of its products, especially when compared to products offered by conventional financial institutions.
“The collaboration amongst regional players is indeed one of the prerequisites to ensure continued growth and development of the Islamic financial industry,” he revealed to The Borneo Post in an exclusive interview.
“With the establishment of a number of international institutions to oversee the different aspects of Islamic Finance such as the International Financial Services Board and the International Islamic Liquidity Management Corporation, we have seen not just the regional players working together for the betterment of the industry, but also various regulators and other stakeholders from all around the world participating and sharing ideas and their experiences in developing Islamic Finance in their respective countries.
“These collaborations are really important to ensure smoother cross-border transactions in Islamic finance transactions and the promotion of better understanding of how syariah principles have been applied for product developments in various countries.”
However, Syarizal said competition for talent was still an issue within the industry due to the limited pool of Islamic finance specialists in Malaysia.
“Various efforts have been taken by the Central Bank and we have definitely seen marked improvements in terms of the pool of talent that we have as compared with where we were five to 10 years ago,” he outlined.
Meanwhile, the director noted that the industry had experienced tremendous growth in the past few years and it has also benefited from the 2008 financial crisis.
However, in terms of percentage of the whole international banking and finance industry, Syarizal believed that Islamic finance still represented a small percentage.
“In Malaysia, total assets in the Islamic banking sector at the end of 2011 stands at RM434.6 billion or 22.4 per cent of the total banking system assets,” he revealed. “The industry will continue to grow, especially in Islamic countries such as Malaysia, Pakistan and the Middle East countries.
He added that African countries had also made significant inroads in developing their own Islamic finance industry and Malaysia had been one of the reference points to aid the development.
“There will also be continued demand from the European countries for Islamic funds products. In addition, there is significant room for further growth in countries with a huge Muslim population such as Indonesia and China where the local Islamic finance industry has not fully developed yet.”
Speaking on main challenges, the E&Y director outlined the need to have a supportive tax framework for Islamic finance, more standardised products as well as a greater pool of talent with the required skills and knowledge to further fuel the industry.
“As discussed above, there is a lot of potential for growth in the region and internationally. Significant efforts have been taken to ensure that Islamic finance can be more prominent in the international scene and the Blueprint is one of them that will help to realise the vision to internationalise Islamic finance.
“However, continuous collaboration among the stakeholders of the Islamic finance industry is required to ensure that we can work towards a global framework in relation to tax, regulatory and syariah for Islamic finance,” he concluded.