Often times, when a general election draws near, I usually get a bit nostalgic and proud of what my country has achieved within 56 short years as an independent and sovereign nation.
It also gets me excited about what else we, as Malaysians, can do to better ourselves as a nation of dreamers and builders.
Naturally, as a Malaysian who has been involved in the Islamic finance industry globally, I am especially proud of what my country has achieved in this field over the years. The industry’s humble beginning in Malaysia started formally in 1963 when Lembaga Tabung Haji was established by the government to facilitate savings among Muslims in a syariah-compliant manner to prepare for their haj.
I am too young (since I was not born yet at that time) to know what actually transpired then, but I am glad it did happen because it led to the creation of the first regulated licensed Islamic bank in the world, Bank Islam Malaysia Bhd, 20 years later. A great many things happened after that, including the establishment of the first licensed takaful company in the world, the first licensed Islamic window operations and the first licensed Islamic asset manager.
Islamic finance was the epitome of the democratisation of the financial market in Malaysia. It brought about real financial inclusion for all.
There are just too many deliberate and structured developments that the industry players, the government of the day and the financial regulators did since then to develop the industry for me to mention here. As such, suffice for me to say that they were generally positive developments that helped propel Malaysia further as a global leader in the industry every step of the way.
Nonetheless, what I will identify as the most important development made, which helped change the world’s view on Islamic finance, is the institutionalisation of a comprehensive legislative, regulatory, legal and syariah framework for the industry in Malaysia – the first of its kind since the fall of the Ottoman Empire in the early 20th century. I dare say that this can and should be considered as one of the most significant paradigm shifting events in mankind’s modern hi story. All Malaysians should hold their heads high for this contribution to modern civilisation.
Thirty years haved passed and today, as a result of the comprehensive framework established, Malaysia has become the largest, deepest and broadest Islamic finance market anywhere in the world with the most comprehensive product offerings – from the simplest basic savings product to the most sophisticated investment products for everyone and anyone in the country, be they individuals or corporate bodies, residents or foreigners, Muslims or non-Muslims.
Clearer sense of destiny
As I contemplate on what to expect in Malaysia post the 13th general election (GE13), I can’t help but be excited with the prospect of Islamic finance moving forward. The reason for my excitement is because finally after 50 years of existence in the country, Islamic finance is being given the needed facelift and makeover.
Unbeknown to many, come May 2, the comprehensive legislative, regulatory, legal and syariah framework that has propelled the Malaysian Islamic industry to be where it is today will be overhauled, refreshed and strengthened in the much-awaited Islamic Financial Services Act (IFSA).
Malaysia’s Islamic finance industry is ready to move forward.
The new IFSA, read together with the Central Bank Act (CBA), provides a much stronger and more effective platform for Islamic finance, unparalleled with any other platform anywhere else in the world.
Islamic finance is now, for the first time, completely institutionalised as a component of the Malaysian financial market by parliamentary legislation.
Its future posterity and prosperity cannot be subjected to the whims and fancies of any individual who may or may not believe in Islamic finance.
Any fundamental change in the industry must now be congruent with what Parliament has set and if it is not, then only Parliament can make the change.
The sanctity and certainty of syariah management and governance in the industry has also been embedded and institutionalised comprehensively in parliamentary legislation.
The IFSA and the CBA clearly define the different duties and responsibilities of all parties in the industry in regard to syariah-compliance and help clarify the relationship between the financial regulators, the licensed financial institutions and the judiciary. It is the first time such thing has ever been done in the world. As a result, the certainty of doing business in the Islamic finance industry will be better than ever and will provide a very conducive platform for the industry to grow bigger and better. Perhaps it is time people look at doing global sukuk issuance under Reg S or 144A using Malaysian law instead of English law.
I anticipate there will be a period of adjustment for the industry in Malaysia as we take in the various changes that the industry will have to go through post the IFSA.
Once everything settles down, I foresee many new product offerings coming up and the Islamic financial institutions attaining a more enhanced competitive edge in the market vis-a-vis conventional riba-based financial institutions. I see the industry entering into its next 50 years of development with a renewed confidence and clearer sense of destiny.
Yes! Our country’s GE13 is coming and as much as I am intrigued like everyone else about the possible outcome of our democratic election, the one thing that I am sure of is that irrespective of the election result, our Islamic finance industry is poised and ready for more great things. I would urge all my fellow proponents of Islamic finance to be ready for the next push.