Malaysia aims to be the world’s Islamic finance marketplace under new initiative - IFN

Malaysia aims to be the world’s Islamic finance marketplace under new initiative

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MALAYSIA: On the 1st August 2013, the Malaysia International Financial Center (MIFC) introduced Malaysia as the World’s Islamic finance marketplace. In his speech during the launch, Malaysian prime minister Najib Razak explained that more cross-border and multi-currency business is needed in the country, and that it is up to the players to create these opportunities. As of May 2013, total Islamic banking assets in Malaysia stood at RM525.63 billion (US$161.97 billion), comprising 24.24% of the country’s total banking assets. During his presentation at the launch, Nik Mohamed Din Nik Musa, director at the MIFC promotions unit, said that Sukuk currently offers more competitive yields compared to conventional bonds due to higher investor interest, with an average disparity of 4bps as at the end of June 2013. In a separate interview, Zeti Akhtar Aziz, chairperson of the MIFC executive committee and governor of Bank Negara Malaysia, said that the initiative to position Malaysia as an Islamic finance marketplace will look to link Malaysia to a network of other global financial hubs, as well as to increase foreign participation both in terms of institutional presence and participation in the capital market. In doing so, the MIFC hopes that the increased internationalization of Islamic finance would influence the patterns of global financial and economic integration, and intensify financial and economic connectivity between countries. According to MIFC, total Islamic assets under management in Malaysia reached RM82.48 billion (US$27.5 billion) as at the end of May 2013; while Shariah compliant equities stood at RM1.01 trillion (US$335.9 billion) out of the total RM1.59 trillion (US$492.66 billion) market share in June compared to non-Shariah equities at RM591.09 billion (US$197.03 billion). Sukuk issued out of Malaysia in the first half of 2013 currently stands at US$41.5 billion, making up 68% of the global Sukuk market. This is followed by Saudi Arabia at 12% and the UAE at 8%. So far, the multi-currency Sukuk market from 2007-13 comprises of US dollar, Singapore-dollar and renminbi-denominated deals. In terms of Islamic funds, Malaysia holds 31% of the global market share as of December 2012, followed by Saudi Arabia at 21%.