Malaysia losing shine as global Islamic finance hub?

Malaysia losing shine as global Islamic finance hub?

Daily Cover

GLOBAL: As the Islamic finance industry continues growing, Malaysia’s status as the industry’s global hub appears to be coming under threat from Saudi Arabia’s burgeoning market for Shariah compliant finance, with the kingdom now home to the world’s largest amount of Islamic banking assets, worth US$207 billion in 2011. According to Ernst & Young’s World Islamic Banking Competitiveness Report 2013, which projects global Islamic banking assets crossing the US$1.8 trillion mark next year, Malaysia trails Saudi in second place with total Islamic banking assets of US$106 billion. The UAE, meanwhile, ranked third with total assets of US$75 billion. A report by Malaysian rating agency RAM however, has highlighted Malaysia’s position as the top destination for ringgit-denominated Sukuk issuances originating from Asia and the GCC. Malaysia issued a staggering US$273.2 billion-worth of sovereign and privately placed Sukuk, accounting for 69% of the global Sukuk market, as at the end of September 2012. Malaysian sovereign Sukuk alone accounted for US$183.2 billion, or 46.3%, of all the Sukuk issued, noted RAM. Dealogic data also shows that for the last 12 months up to the 11th December, Malaysian Sukuk issuances continue to lead the market, at US$28.8 billion, against US$8.8 billion-worth of offerings from Saudi. Saudi’s market has however rapidly gained traction in 2012, with the General Authority for Civil Aviation’s US$4 billion sovereign Sukuk issuance at the beginning of this year providing the first rumblings of Malaysia’s traditional leadership position in the Sukuk market coming under threat. Furthermore, Ernst and Young’s report also highlighted new markets for Islamic finance on the horizon, such as Egypt, Indonesia, Iraq and Libya, with a number of establishing and new banks considering introducing Islamic banking operations in those countries. Gordon Bennie, a partner and the MENA Financial Services Leader at Ernst & Young, said that: “10 of the world’s 25 rapid growth garkets have large Muslim populations and present significant growth prospects for Islamic banking. The fast growth economies now form almost half of the global GDP and remain the main contributors to overall global growth. The outlook for Islamic banking in these markets is bright.” With new entrants and competition heating up in the Islamic finance industry, Malaysia may just be losing its shine as the industry’s global hub.