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Tuesday, 9 July 2013

Malaysia: Islamic finance - New engine for growth

In an interview on the industry outlook and the role of Islamic banking in Malaysia, Al-Rajhi CEO Datuk Azrulnizam Abdul Aziz said the growth of the sector will bring job opportunities for Malaysians and will also raise Malaysia’s standard as an Islamic financial hub.

Azrulnizam pointed out that the recent crisis in the conventional banking sector was one of the reasons that spurred Islamic finance growth across the globe, turning it into a winning phenomenon that discarded greed in particular.

Q: What are the benefits for the public and the country with the fast paced growth of Islamic banking and finance in Malaysia?

A: The spillover effect from the economic growth in the Islamic finance sector will definitely benefit the Malaysian public at large, particularly in terms of employment opportunities and choice of Islamic finance products.

The financial sector is expected to provide employment of up to 275,400. The sector, which is the new engine for economic growth, saw strong performance in 2012 with higher profitability of over RM4 billion, assets reaching half a trillion ringgit.

Innovations and greater liberalisation of the Malaysian financial sector strengthened the international dimension of the Islamic banking system, offering possibilities for Malaysia to enter into inter-regional trade and cross border investments.

Q: Do you think Malaysia’s market situation will allow Islamic banks to beat conventional banks in the long run?
A: The recent global financial crisis in 2007 proved that there was a systematic failure of financial regulation, poor governance and most of all greed. At the back of the crisis, Islamic finance continues to prevail and grow stronger. Now we are seeing greater interest in Islamic finance, be it from the customer point of view, industry players as well as financial centres. The strengths in Islamic finance are derived from the Shariah principles, it is the main pillar that has contributed towards stability and resilience of Islamic finance.

Q: The International Gold market is crumbling, with gold prices tumbling rapidly. Is it time for the customers to put their money in the Al-Rajhi gold products and what do you think of the rapid fall in gold prices?

A: “Buy low, sell high” is the ideal investment philosophy for any Al-Rajhi customer to take advantage of the current dip in the gold price. It is recommended for any medium risk investor with a minimum five year horizon to invest in our physical gold regularly to benefit from the “Ringgit Cost Averaging” method.

Q: What differentiate Al- Rajhi’s products from other Islamic banks?

A: Al-Rajhi offers distinct and unique full Shariah-compliant products and services to the market. The recent introduction of Collateralised Commodity Murabahah-i (CCM-i) an instrument for Treasury in managing daily market transaction. We are the first Islamic financial institution to adopt such instrument, showing our penchant for innovative and pioneering product solutions.

Q: What is the latest milestone for Al-Rajhi since its inception in Malaysia?

A: Al-Rajhi has grown it footprint to 24 branches all over Malaysia, latest being a branch in Sg Petani, Kedah. Last year, we developed the CCM-i which is based on a Commodity Murabahah transaction and backed by a pledge mechanism, introduced as an alternative solution in addressing the urgent demand of Islamic banks in managing liquidity. It is a low credit-risk financial instrument for the Islamic interbank money market players, enabling Islamic banks to tap on liquidity by utilising their holdings of tradable sukuks and other acceptable Islamic securities as pledge for their liquidity requirements.

This year, we just launched new initiative which is called “Hijrah with Al-Rajhi” aimed at increasing customer base, liabilities and assets.

(The Malaysian Reserve / 08 July 2013)

Alfalah Consulting - Kuala Lumpur:
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