Local Islamic financial sector gains ground in the global arena

KUCHING: After more than a decade of coordination, Malaysia’s Islamic finance services (IFS) sector now boasts of the world’s largest sukuk market, second-largest takaful market and a major Islamic banking and securities industry.

Malaysia had also established itself as an intellectual capital in IFS globally, with many research and training initiatives in syariah law as well as finance that were unmatched elsewhere, Oxford Business Group (OBG) stated in its report recently.

“The sector continues to evolve, with progress outlined in a variety of policies including the new financial sector blueprint, the central bank and government’s programme for taking the sector forward to 2020, the Economic Transformation Programme and via a strong of supporting measures announced in the 2012 budget,” it added.

The expectation in the sector was that growth was set to continue, with Malaysian IFS also taking an increasingly large part in international business.

While globally known for its sukuk market, Islamic capital markets (ICMs) contain much more besides, making them some of the most developed in the world, OBG pointed out.

Securities Commission (SC) figures for the second quarter (2Q) of 2012 showed that 825 syariah-compliant securities were listed on the bourse while Reuters figures for April 2012 showed 165 Islamic mutual funds, with combined assets of RM29.9 billion.

“The number of Islamic wholesale funds, according to the SC, was 30 in 2Q12 out of 154 in total, up from 24 out of 122 in the same period of 2011,” it said. “Islamic wholesale funds accounted for 31 per cent of net asset value in June 2012.”

In the same period of 2012, there were RM63 billion of Islamic assets under management (AUM) or 14 per cent of the AUM total. There was one Islamic exchange-traded fund (ETF), out of five in the industry as a whole, with this taking 32 per cent of the ETF total for the country or RM300 million.

There were also three Islamic real estate investment trusts, with a combined market capitalisation of RM3.3 billion or 18 per cent of the industry total.

“With a strong level of government support and a range of well managed and capitalised companies in banking, takeful and the Islamic capital market, Malaysia is set to take the leap envisaged by the second financial stability board and the Capital Market Master Plan 2,” OBG stated.

“This involves the further internationalisation of the sector, with the critical mass already achieved likely to see Malaysian IFS outfits become much more of a global presence,” it added.

“Underpinning this will be success in determining accept ble sharia-compliance rules, primarily between Malaysia and the Gulf countries, its closest rivals for the international IFS crown,” it concluded.

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