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Malaysia slated to be global hub for syariah finance

Posted on April 8, 2013, Monday

PICKING UP PACE: As of November 2011, 89 per cent of the securities listed in Bursa Malaysia were syariah compliant and represents around two thirds of Malaysia’s market capitalisation.

KUCHING: The global Islamic banking and finance industry is on a strong growth path with worldwide assets in Shariah compliance growing four times from 0.5 per cent to two per cent of the world economy after the financial crisis.

Malaysia today is the world’s third largest market for Islamic banking, takaful and sukuk. The country’s Islamic capital market tripled in size to a value of RM1.05 over the past decade.

In comparison, other large Muslim countries are still at an early stage of growth.

According to intelligence group Inside Investors, global share of Islamic banking assets in Malaysia was expected to increase from eight per cent in 2009 to 13 per cent in 2020, and the global share of takaful contribution was expected to increase from 11 per cent to 20 per cent in 2020.

At least one Islamic financial institution in Malaysia should enter the global top ten by asset size list by 2020 noted Inside Investors.

The Malaysian government is also encouraging Developmental Financial Institutiuons (DFIs), which it has set up to drive the venture capital and private equity sector, to gradually shift towards ‘Islamic finance first’ whenever possible.

This policy will be implemented in a manner that will not prevent DFIs from fulfilling their developmental obligations.

As of November 2011, 89 per cent of the securities listed in Bursa Malaysia were Shariah compliant and represented around two thirds of Malaysia’s market capitalisation. A total of 839 out of 946 securities listed were syariah compliant, it explained.

Malaysia also aspires to become a centre of excellence for Islamic finance research, development and education.

The business intelligence group explained that several human capital development institution including the International Centre for Education in Islamic Finance, the International syariah Research Academy for Islamic Finance and the Asian Institute of Finance had already been established.

Investments into research and education on Islamic finance will be continued, with a focus on new product development, Islamic finance higher education institution and academies as well as award programmes.

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