Malaysia's $160 billion state pension fund has hired consultants to study the possibility of establishing one of the world's first state-backed pension funds focusing entirely on sharia-compliant investments, sources familiar with the matter said. If it goes ahead, the plan could pour billions of dollars into sharia-compliant assets in Malaysia, stimulate its Islamic finance sector, and provide a model for other predominantly Muslim countries such as those in the Gulf, reports Reuters (6 March 2014).
The Employees Provident Fund (EPF), the world's sixth-largest pension pool, is looking at the viability of such a fund from accounting, legal and sharia-compliance standpoints, the sources said, declining to be named because the matter is not yet public. Global advisory firm Ernst & Young, Kuala Lumpur-based law firm ZICOlaw and ZICO's sharia advisory team were hired in late 2013 and are to present a final study to the EPF this year, the sources told the news agency.
"Depositors are asking for the option to put their savings into sharia investments alone, so the EPF is looking to set up the end-to-end infrastructure, from collecting contributions to returning dividends," the report quoted unnamed sources.
The report suggests that having a standalone, state-backed Islamic pension fund would put Malaysia ahead of most countries in developing its pension industry. The fund might be the world's first such institution outside Iran, where the entire financial system is designated as Islamic.
The EPF has set up an internal committee to steer the project, which it hopes to implement within two or three years. But the timeline will depend on the final study from the consultants, one of the sources said. "They want to make sure that a separate fund will be an attractive proposition, by matching the returns people are used to seeing from the EPF."
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