Malaysia: Ample growth opportunities for Islamic finance
PETALING JAYA (June 5, 2013): There are ample opportunities for Islamic finance to flourish, boosted by the resilient Asian economic landscape, the region's positive economic outlook and growing middle class affluence, said Securities Commission (SC) chairman Datuk Ranjit Ajit Singh.
"Infrastructure investment is an important component of economic development. The Asian Development Bank has projected that Asean nations will require an average of about US$60 billion of infrastructure investment a year between 2010 and 2020," he said in his keynote address at the 4th World Islamic Banking Conference Asia Summit 2013 in Singapore yesterday.
"A recent McKinsey report has suggested that infrastructure investment in China will average about US$1 trillion per annum up to the year 2030, while India's infrastructure investment is forecast to be about US$1 trillion under its twelfth five-year plan, between 2012 and 2017," he added.
Ranjit said these substantial amounts provide tremendous potential for financing and capital raising through the issuance of sukuk, as many infrastructure assets are inherently shariah-compliant and sukuk naturally captures a wider subscriber base due to its appeal to both conventional and shariah-based investors.
In addition, cross border offering of sukuk will also promote greater diversity in terms of the issuing currency, as well as the industry and geographical profile of the issuers.
"At the same time, growing affluence among the Asian middle class will generate increasing demand for investment and savings products. With a large proportion of the Asian population potentially seeking shariah-compliant alternatives, especially in Southeast Asia, the opportunity for Islamic investments to meet this prospectively strong demand should not be underestimated," said Ranjit.
He said in the medium to longer term, demand for more sophisticated and comprehensive services will help spur the development of a vibrant Islamic wealth management industry that will serve regional and international customers, incorporating various aspects of Islamic finance including fund management, takaful and real estate, to name a few.
He also urged stakeholders to collaborate and cooperate in pursuing the developmental agenda for Islamic finance to unleash the full potential that it has to offer and such initiatives should include effective branding and profiling of Islamic finance and its value proposition on a global scale, to generate greater appreciation and acceptance of Islamic finance.
The sukuk market registered a record total issuance size of US$131.2 billion globally last year, a 54% increase over 2011.
"Last year, Kazakhstan and France were among the jurisdictions that issued sukuk for the first time while several other countries have indicated interest to issue sukuk in the future. 2013 is developing to be another promising year with total issuance size of US$31.7 billion globally in the first quarter," said Ranjit.
The Ernst & Young World Islamic Banking Competitiveness Report 2013 showed that global Islamic banking assets held by commercial banks amounted to US$1.3 trillion as at 2011.
The top three countries with the largest Islamic banking industry are Saudi Arabia with an estimated US$207 billion of Islamic assets, followed by Malaysia with total assets of US$106 billion and the United Arab Emirates at US$75 billion.