Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Standard view
Full view
of .
Look up keyword
Like this
0 of .
Results for:
No results containing your search query
P. 1
Islamic Financial Market in Malaysia

Islamic Financial Market in Malaysia



|Views: 3,034|Likes:
Published by Saiful Azhar Rosly
Islamic financial market - banking, takaful, fund management, stocks and sukuks.
Islamic financial market - banking, takaful, fund management, stocks and sukuks.

More info:

Published by: Saiful Azhar Rosly on Oct 09, 2008
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less





Islamic Financial Market in Malaysia
Prof. Saiful Azhar RoslyInternational Center for Education in Islamic Finance10
October 2008. The establishment
of the Malaysian Islamic Financial Center (MIFC) in August2006 to spearhead Malaysia’s leading role in global Islamic finance is asignificant and critical milestone in Malaysia’s financial sector development.Since 1983, when the first Islamic bank in Malaysia was set up, thegovernment in general and the Central Bank of Malaysia in particular, hasbeen proactive in providing suitable infrastructures for Islamic bankingbusiness operations to take off in a modern capitalist economic system.In1992, Islamic windows were introduced to expand Islamic banking servicesnationwide and further enhancement was made in 2002, when Islamic windows converted into Islamic banking subsidiaries to give greater autonomyto Islamic banking outfit that operates under a conventional bank holdingcompany. The Islamic Banking Act 1983 provides new avenues of financing for Islamicbanks where products bearing trading, leasing and partnership contracts areallowed in the banking business. It opened up vast opportunities for newproduct innovation beyond traditional lending and borrowing facilities found inconventional banking. Islamic contracts such as
murabaha, ijarah, istisna,salam, wakalah, mudarabah 
can be readily applied to depositsand financing activiitesof Islamic banks. With current market share of Islamicdeposit and asset at about 14 per cent each, it is a great challenge for Islamicbanking to achieve the 20 per cent market share target in year 2010. Hence
product innovation is critical. Prevailing financial crisis in the US saw greatereffort in risk and capital management of Islamic banks. The Islamic capital market gradually developed in 1990s and was identified inthe Capital Market Masterplan (CMP) as a niche area where Malaysia wascompetitively placed to play a leading international role. In 1999, the KLSESyariah Index was introduced as a barometer of Islamic equity market activity.Earlier in 1997, the inaugural list of Syariah approved securities were releasedin June 1997 with around 50 per cent of stocks listed as Shariah compliant. The East Asian economic crisis prompted the birth of the Islamic bond marketto relieve stress on banks in providing capital to business. In 1990, the first
al- bai-bithaman ajil 
Islamic bond worth RM125million (USD33 million) was issuedby Shell MDS Sdn. Bhd. The Malaysian government further issued RM2.2billion (USD600million) global sovereign sukuk in 2002 that uses ijarah as theincome generating vehicle, a vast departure from local Islamic debt securitiescommonly structured under
bay al-inah 
contract. Islamic bond grew at anaverage 150% over 1999-2003 peaking at RM14 billion in 2002. The worldlargest sukuk issuance of RM15.35 billion (USD4.8billion) went to BinariangGSM in 2007. The Islamic fund market lifted off in 1997 with two funds at 3 % market shareand grew steadily 52 Islamic funds in 2003 with a total asset value (NAV) of around RM4.6 billion. As of end 2007, the number of Islamic unit trust fundsin Malaysia has grown to 134 funds with a net asset value of RM16.9 billion(USD4.8 billion).With the fast changing landscape in global finance, challenges to Islamicfinance are enormous. First, it has to deal with the complexities of modernfinancial markets where the elements of interest (riba) and gambling (maisir)are evident in banking products, fixed income instruments and financialderivatives. This concerns Shariah risk when Shariah scholars were found toapprove new products without significant departure from conventionalpractices. One example concerns the sukuk products, where AAOIFI hasdeclared that when beneficial ownership of underlying asset is not with theinvestors, the sukuk is deemed Shariah non-compliant. Based on thisimportant ruling, about 80% of existing sukuks have failed the Shariahcompliance test. On scale economies, Islamic financial institutions, especiallyIslamic banks were found too small to compete with large superbanks in

Activity (19)

You've already reviewed this. Edit your review.
1 thousand reads
1 hundred reads
Xiao Shi liked this
Yvonne Ha liked this
Queenie Lau liked this
hormuud liked this
bakhot liked this
Syahmi Hayat liked this
Kiwie Stobbery liked this

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->