Monday, March 17, 2014

TMR: Widening scope for Shariah-compliant financial tools

By Kazi Mahmood
The Islamic banking sector has enlarged its scope of business, covering a wider range of commercial needs for working capital and trade financing among others, said a report published by the Malaysian International Islamic Financial Centre (MIFC).

“Shariah-compliant financial solutions now range from working capital, trade financing, re-financing and capital expenditure needs as well as the household and the retail sector,” the report entitled "Shariah compliance in all matters, the priority of a robust Islamic finance ecosystem" said.

The report indicated the retail sector is well covered with Islamic financing products that meet their asset financing needs, such as home financing or car financing, personal financial and other retail liquidity needs.

In addition, the government and government-related entities have been actively tapping into the Islamic finance sector to raise funds to support their fiscal, revenue and infrastructure expenditures, it said.

The report offered an insight on the progress of the Islamic banking and financial sector in Malaysia in 2013.

As at the end of 2013, Malaysia’s Islamic banking sector held over US$130 billion (RM98.34 billion) in assets and the country has the largest and most liquid sukuk market with amounts outstanding over US$158 billion.

The sukuk market in Malaysia represents over 58% of the global sukuk outstanding.

Furthermore, Malaysia also has the largest Islamic funds sector (in terms of number of funds domiciled) with over US$16.3 billion of assets under management while it has the second-largest takaful market with total gross contributions estimated at over US$2.2 billion.

The Malaysian Islamic finance sector also provides lucrative investment opportunities to investors globally seeking healthy and ethical returns and over the years, the sector has attracted substantial inflows of funds from global investors, particularly from the Middle East.

Since the inception of the Islamic finance industry in Malaysia three decades ago, the country has successfully embarked on a number of strategies and initiatives to develop the industry.
Among these include the robust and sound development of a comprehensive Islamic finance ecosystem that guide the country’s
Islamic financial institutions in effectively managing the Shariah compliance of the operations.
“These have been critical in substantially attracting Islamic finance business in the country from both domestic and global stakeholders,” the report indicated.

To date, Malaysia has the world’s most progressive Islamic finance marketplace, leveraging on the country’s long track record of over 30 years of experience in building a successful domestic Islamic financial industry, the MIFC said in the report published in late February 2014.

“Rapid liberalisation in the Islamic finance industry, coupled with facultative business environment have encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business,” the report added.

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