KUCHING: The nation’s Islamic capital market is seen as being intelligently positioned within the evolving Islamic financial-services industry, says ratings RAM Rating Services Bhd (RAM Ratings).
To this end, RAM Ratings’ head of Islamic ratings, Zakariya Othman noted the positive results following the carefully-planned and strategic approach adopted in the country to develop a comprehensive Islamic financial system that would co-exist with its conventional counterpart within the broader financial landscape.
“The findings of a survey by a GCC (Gulf Cooperation Council)-owned research house show that Malaysia has a clear lead over other financial centres in terms of regulatory and legislative frameworks, infrastructure, range of products and services, risk management and audit as well as statistical, marketing and education
of Islamic finance,” he added.
As one of the panel members at the 17th Annual World Islamic Banking Conference 2010 (WIBC 2010) in Manama, Bahrain, Zakariya cited two key factors that must be taken into consideration when tackling legal constraints namely the competency of the civil courts in hearing Islamic banking and finance cases, as well as the adherence to a recognised body such as the Syariah Advisory Council of
Bank Negara, or Securities Commission of Malaysia.
He further highlighted that the new Central Bank of Malaysia Act 2009 – which came into effect on Nov 25 2009 – made it mandatory for the courts to refer to the Syariah Advisory Council on rulings concerning syariah matters.
“The subject matter dealt with in the civil courts in Islamic finance cases is finance and not Islam. As such, Islamic finance cases can be submitted under the jurisdiction of the civil courts. However, the judge should have full knowledge of syariah.”
On the management of sukuk defaults, Zakariya pointed out that the matter had received less criticism and scrutiny due to the country’s robust supervisory structure, established governance and disclosure standards as well as the highly-developed legal framework and court system.
However, he also concluded that a country’s success in Islamic finance was not just tethered to the number of sukuk issues or Islamic banks in its financial landscape.
“Regulatory structures and legal frameworks need to be established to encourage the influx of business in that particular jurisdiction,” he noted.