Commendable growth of Islamic finance
MALAYSIA made further progress as it Islamic financial system transitions to become an international Islamic financial centre, recording commendable growth despite the volatile international financial markets and uncertainties clouding the global economy.
Total assets in the Islamic banking sector increased by 23.8% to Rm434.6bil to account for 22.4% of total banking system assets as at end-2011.
The volume of Islamic foreign currency business conducted by international Islamic banks and international currency business units within licensed Islamic banks has also increased substantially over the years.
In the takaful sector, total assets of takaful funds increased by 15.8% to Rm17bil as at end-2011, while total takaful contributions accounted for 13% of total premiums and contributions in the insurance and takaful industry, up from 12.4% in 2010.
Malaysian Islamic banks and takaful operators have also attained global recognition, with 39 institutions ranked among the world’s top 500 Islamic financial institutions, and 21 institutions within the top 100 in The Banker Magazine’s latest rankings published in 2011.
Malaysia also continued to dominate the global sukuk market and remains a top investment destination for Islamic funds, with sukuk issued in Malaysia accounting for 73.2% (2010: 72.5%) of global sukuk issuances in 2011.
In addition, outside the Gulf Cooperation council region, Malaysia accounted for the highest amount of outstanding US dollar-denominated sukuk globally.
In developing a comprehensive Islamic financial sector, priority has been accorded to developing a deep and liquid Islamic financial market that is able to mobilise funds effectively and efficiently, in accordance with syariah principles.
An important catalyst for this has been innovations in financial market instruments. In June 2011, the Wakala Global Sukuk amounting to Us$2bil was issued by Wakala Global Sukuk Bhd on behalf of the Government.
Bank Negara Monetary Notes-Istithmar was issued in 2011 to increase the diversity of Islamic instruments in the Islamic money market and provide additional avenues for market participants to manage liquidity more efficiently.
The syariah-compliant Exchange Traded Funds, an innovative product launched in 2008, received an additional boost of Rm200mil in seed funds as part of efforts to broaden the options available for investments of Islamic portfolio funds.
These initiatives made important contributions to the promotion of vibrant and liquid Islamic financial markets to meet the varied needs of investors.