Malaysia Islamic Banking Assets Rise 16 Percent to $116 Billion (USD)
Islamic banking assets in Malaysia, the world’s biggest market for Shariah-compliant debt, rose 16 percent last year after the government approved new licenses and eased restrictions on foreign ownership, the central bank said.
Assets that comply with Islam’s ban on interest increased to 350.8 billion ringgit ($116 billion) and accounted for 21 percent of the total banking system, according to Bank Negara Malaysia’s 2010 annual report published in Kuala Lumpur today.
“Malaysia’s position as the global hub for Islamic finance will continue to be reinforced, supported by a diverse set of institutions, deep, liquid and efficient financial markets,” the central bank said. Bank Negara will “focus on developing the players, infrastructure and expertise required to meet the needs of the growing economy.”
The Southeast Asian nation, where 60 percent of the 28 million people are Muslims, will issue new permits this year for Islamic banks with a minimum capital of $1 billion, Deputy Governor Mohd Razif Abd Kadir said Jan. 28. The central bank granted five licenses in 2010 to foreign banks including National Bank of Abu Dhabi PJSC. Four family takaful operators, or Islamic insurers, also received permits including a joint venture between AIA Group Ltd. and Alliance Bank Malaysia Bhd.
“With the expertise, global network and strong business capacity,” international institutions “will contribute to the future growth and diversity of Malaysia’s financial system, support new areas of economic growth and facilitate international trade and investment flows,” it said.
Shariah-compliant lending rose 19 percent to 222.3 billion ringgit in 2010 and accounted for 23 percent of total loans, according to the report. Bank Negara will issue a blueprint this year that will detail strategies and recommendations for the Islamic finance industry, it said, without giving details.
The $1 trillion Islamic finance industry has expanded 20 percent annually since 2000 and is among the fastest-growing segments in global banking, according to an April report from the Kuala Lumpur-based Islamic Financial Services Board.
Sukuk, or Shariah-compliant bonds, sold in Malaysia reached $94 billion in 2010, accounting for 66 percent of the total outstanding around the world, according to the central bank report.
Islamic insurance, which is based on the Koranic principle of mutual assistance whereby members are the insurers as well as the insured, rose to account for an 8.7 percent share of the total market last year, from 8.3 percent at the end of 2009, the report said. Total Islamic insurance assets increased 18 percent to 14.7 billion ringgit at the end of 2010 from 2009.
“The Islamic banking system continued to remain resilient throughout 2010, supported by high capitalization and improvement in asset quality,” the central bank said.