It dominates the primary and secondary debt capital market with 70%-80% market share. It also dominates the equity capital market with close to 90% of the listed stock on Bursa Malaysia being Shariah-compliant stocks.
It is increasingly becoming a force in the banking sector with a 30% market share. Many other components of the Islamic financial market such as takaful, asset management, wealth management, private equity, etc, are also growing by leaps and bounds with increasing market share.
The following are my hopes for the future of the market in Malaysia:
1. I would like to see better recognition and acceptance on the part of everyone involved in the market on the difference between Islamic banking activities, Islamic debt capital activities, Islamic equity capital activities, Islamic asset management activities, Islamic private equity activities and Islamic operating lease activities.
Of course, this is not an exhaustive list of the activities done in the market and people need to learn all of them to have better appreciation of them.
2. I would like to see people having a greater understanding of the difference between a licensed bank, a licensed investment bank, a non-bank financial institution, a licensed fund management company, a private equity firm, a licensed investment company, non-profit organisation undertaking, etc, that are undertaking the myriad of existing Islamic financial activities in the market.
3. I would like for people to stop accusing Islamic financial institutions in general of merely emulating and replicating the products and services of conventional financial institutions. They need to learn that an Islamic bank’s offerings are not dependent on what a conventional bank offers.
In my experience, when it comes to developing and innovating products for the Islamic financial market, I, just like many other bankers in Islamic financial institutions, am only interested in providing financial solutions that are desired and needed by consumers in a manner that is consistent (ie not in contradiction) with Shariah.
If a product turns out to have the same feature or deliver the same economic effect as a conventional financial product, then it is a mere coincidence, considering that both Islamic and conventional banks try to meet the same consumer demands.
4. I would like for people to stop trying to find a distinction between an Islamic bank and a conventional bank undertaking banking activities.
A bank, irrespective of whether it is an Islamic or a conventional bank, exists to intermediate between the haves and have-nots by meeting the differing financial needs of the various customer segments (eg mass market, mass affluent, HNWIs, corporate, institutional investors, etc).
The only difference or distinction between an Islamic and a conventional bank or any type of operating entity doing other Islamic or conventional activities would be the fact that an Islamic bank or institution undertakes its activities purely in a manner consistent with Shariah, while the conventional institutions are not Shariahcompliant.
5. I would like to see the proliferation and inclusion of wakaf in the Islamic financial market. Wakaf is the missing component in the market now.
6. I would like to see the education on the prohibition of riba or usury to be done starting from pre-school up to pre-university in the country’s education syllabus.
Most of us are taught about what is halal and haram in terms of food consumption from the time we were born (just to exaggerate), so it should not be difficult for the same to be done for our financial and economic dealings.
7. I would like to see our Islamic financial institutions become more international in its operation — more Islamic banks to obtain international rating; more of them having the capacity to do cross border financial activities to facilitate intra-trade in a Shariah-compliant manner.
8. I would like to see more Malaysian bankers based in Malaysia, either still serving or retired, being recognised by Malaysians as the global market leaders that they are or were.
Too long have we awarded and recognised foreigners over Malaysians when in fact the architects of the Islamic banking industry, the debt capital market or sukuk market (both local and global), the takaful industry, the Islamic equity capital market, the Islamic asset management and many more are all Malaysians! We should stop being shy of our talent and capacity.
9. I would like to see less confusion on how Islamic finance is governed under Shariah. We should fully embrace the basic principle of Shariah that everything is allowed unless clearly and expressly stipulated as disallowed in the Quran and legitimate Hadith.
The onus is to prove that something is disallowed instead of trying to prove that something is allowed. We need to put our energy in the right place so that the dynamism, robustness and integrity of our market is not lost.
10. I would like to see more Malaysian bankers having Shariah degrees. More Shariah degree holders should aspire to become bankers instead of just religious teachers.
If banks can hire English, agriculture, engineering, law or accountancy graduates, we can definitely hire Shariah graduates as bankers but they must be willing to slug it out just like everybody else.
There are many more things that I hope to see happening in the Malaysian Islamic financial market but suffice for me to stop at a list of 10. I hope the new parliamentarians and state assemblymen will share some of the hopes that I have listed here.
Legislators play a significant role in creating the right platform for a more inclusive Islamic financial market and we have not communicated enough on their roles in making Islamic finance in Malaysia the best in the world all these years.
I wish all of them the best in their new five-year term and look forward to their continuing support of Islamic finance.
[Badlisyah Abdul Ghani is the ED and CEO of CIMB Islamic Bank Bhd. This column appeared in the 6 May 2013 issue of The Malaysian Reserve]
