MALAYSIA: As one of the
forerunners of Islamic finance in the world, Malaysia has always been at
the helm in terms of product innovation and market participation: made
possible by the strong support rendered by comprehensive regulation
across all sectors of the Shariah compliant financial industry. The
Southeast Asian nation continues to forge ahead with new initiatives,
several of which were announced today at the Global Islamic Finance Forum
(GIFF) 2014 in Kuala Lumpur.
Dr Zeti Akhtar Aziz, the governor of Bank Negara Malaysia (BNM), in her
keynote speech this morning emphasized the vital importance of Islamic
finance as a platform for international linkages, and the role of Shariah
compliant institutions in achieving balanced growth across both economic
sectors and geographical regions.
"Islamic banks must diversify their business into investment
intermediation to strengthen the linkage between finance and the real
economy," she also urged: citing Malaysia's new Islamic Financial
Services Act 2013 and its inclusion of new provisions to enable banks to
act as intermediaries: such as the separation of investment and deposit
accounts. She revealed that a multibank platform is currently being
developed in Malaysia to allow for the matching of funds between
investors and relevant banks and industry participants to take place,
effectively optimizing the process of funding individuals and corporates
in targeting ventures in need of funding. Participation in this new
avenue will also be extended to foreign investors through multicurrency
offerings. "It might look like venture capital," explained
Zeti: "But in fact it is banks and investors providing direct
funding, rather than taking an equity stake."
Talent development was another key facet of the speech: and it was
announced that in addition to a new financial qualification structure
being launched today by the Finance Accreditation Agency (FAA) in a bid
to link all different qualifications, the FAA will also introduce a new
learning standard to ensure more consistency across the industry
worldwide in line with global benchmarks. These initiatives are timely as
the Islamic finance industry, according to some figures, will be facing a
talent gap of approximately 50,000 in the next few years just in emerging
markets alone, making talent development a crucial priority and an
internationally recognized standard for Islamic finance qualification and
courses is key in meeting this human capital gap.
Keeping up with the theme of creating global linkages for the rapidly
growing Islamic finance industry worth over US$2 trillion in assets
worldwide, Malaysia is also taking the lead in establishing a pioneering
digital application for banks and market participants to enhance
cross-border knowledge and information-sharing, and to ensure that
Islamic finance transactions taking place are consistently linked to the
real economy.
Taking heed of the limited secondary market and lack of Islamic liquidity
management instruments, BNM is expecting to shortly introduce a Mudarabah
certificate instrument with returns linked to the underlying asset and
with high tradability in the secondary market, which is expected to
"draw significant interest from investors".
As a nascent industry, the Islamic finance ecosystem faces the challenge
of achieving balanced growth, and while the Shariah compliant financial
industry has taken great strides to anchor itself on the global stage,
there remain gaps it must address in order to unlock its immense
potential for what Zeti identified as "a transformative role in the
global financial markets". In evolving into the next growth phase,
she concluded, it remains imperative for Islamic finance to meet Shariah
requirements, link to the real economy, strength economic linkages and
enhance international cooperation.
Hosted this year by the Association of Islamic Banks Malaysia, GIFF is
held every two years in Malaysia, and will run till the 4th
September.
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