Entries in English and Malay (Bahasa Melayu)

Sunday, 9 February 2014

Malaysia: Boost for syariah home financing, Govt gives 20% stamp duties discount

KUALA LUMPUR: Islamic home financing in Malaysia may beat last year’s record in 2014, as the Government provides tax incentives to get more people to use syariah-compliant borrowing, according to CIMB Group Holdings Bhd.
Mortgages that comply with the ban on interest climbed 30% in 2013 to an unprecedented RM61.9bil (US$18.7bil), Bank Negara data showed. Conventional home financing grew 10% to RM271bil, the same pace as 2012, even after the Government introduced property curbs to rein in speculation.
The Government is giving a 20% discount on stamp duties for mortgages that comply with religious tenets as it seeks to boost Islamic banking assets to 40% of the total by 2020 from 24%. The Government started holding monthly roadshows last year to create greater awareness of such financing principles, as it strives to enhance the nation’s status as a global syariah hub.
“There’s still strong potential for Islamic financing,” Badlisyah Abdul Ghani, chief executive officer (CEO) at CIMB Islamic Bank Bhd, a unit of CIMB Group, said in a phone interview in Kuala Lumpur on Wednesday. “The roadshows and the incentives are helping syariah mortgage growth.”
Malaysia is also trying to boost such mortgages by offering to waive stamp duties for the refinancing of existing home loans that don’t conform to syariah principles. Syariah-compliant property borrowings had risen an average 31% per annum over the past five years to account for 19% of the total RM333bil market in 2013, central bank data showed.
Syariah home loans differ from their conventional counterparts in that a bank typically buys the property on behalf of the customer and rents it back at a mark-up to avoid interest payments. Some of the more popular options include contracts such as Ijarah, Murabaha and Tawarruq.
The central bank cut the maximum duration on all mortgages to 35 years from 45 years in July to rein in household debt, which had risen an average 12% per annum since 2008. In October, the Government increased property gains taxes and imposed curbs on foreign ownership.
The nation’s Islamic banking assets had more than doubled to RM543bil in the past five years, according to October figures issued by the Treasury. Sales of syariah-compliant bonds, or sukuk, rose 69% in 2014 from the year-earlier period to RM5.9bil, data compiled by Bloomberg showed. Issuance totalled RM49bil last year after reaching a record RM95.8bil in 2012.
The Bloomberg-Aibim Bursa Malaysia Corporate Sukuk Index of ringgit-denominated debt fell 0.9% this year to 104.155 as of Feb 4, almost erasing last quarter’s 1.1% gain.
“Islamic mortgages complement conventional ones,” Syed Abdull Aziz Jailani Syed Kechik, CEO at OCBC Al-Amin Bank Bhd, the Islamic unit of Oversea-Chinese Banking Corp, said in a Feb 4 e-mail interview. “One of the draws can be said to be the efforts by the Government and central bank to boost the market through incentives related to taxes.”
Last year’s curbs failed to prevent Malaysia’s House Price Index from climbing 1.4% to a record 194 in the three months ended September, the 19th straight quarterly advance, according to data from the Finance Ministry.
Mortgage demand might also pick up this year, particularly in the first half, as property investors sought to guard against a potential acceleration in inflation, CIMB’s Badlisyah said.
Consumer prices climbed 3.2% in December from a year earlier, the biggest gain since November 2011, an official report showed on Jan 22. Costs may increase further after Tenaga Nasional Bhd raised electricity tariffs on Jan 1.
“The products that have been put out in the market have been very well-received both by Muslims and non-Muslims,” Baiza Bain, managing director at Amanie Advisors Sdn Bhd, a Kuala Lumpur-based Islamic finance consultancy, said in a phone interview on Wednesday. “Islamic finance is still very nascent compared to conventional finance. It definitely needs incentives to push the assets toward the right level.
(The Star Online / 07 Feb 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Islamic finance assets to reach $2.1 trillion by end-2014

Islamic finance industry will continue to grow driven by both demand and supply factors, and further facilitated by government agencies and financial regulators, KFH-Research, a subsidiary of Kuwait Finance House Group KFH-Group, said in a report.

The report, which focuses on 2014 Islamic finance expectations, forecasts that Islamic finance industry will continue to draw tremendous double digit growth rates across all sectors. 

Moreover, the report forecasts that the total Islamic finance assets to reach $2.1 trillion by the end of 2014, and the total asset of Islamic banking sector to reach $1.6 trillion.

In 2014, gross contributions of the global takaful industry are expected to surpass the $20bln mark. The growth opportunities for the global takaful industry in 2014 and beyond are optimistic on the back of several economic, financial and socio-demographic trends. A number of regulatory developments and government policies that have been put in place are expected to spearhead the growth of the takaful and insurance sectors in various markets during 2014. 

Overall, Islamic finance in 2014, is set to experience another increased momentum, particularly in the sukuk market with the issuances by few sovereigns e.g. UK and Luxembourg.

The Islamic banking sector is likely to witness a surge in demand underpinned by greater economic participation of Muslim nations as well as driven by stronger demand from the population towards Shari’a compliant or ethical financing solutions. Instrumental roles played by multilateral organisations and regulatory bodies are expected to further benefit the Islamic banking and takaful industry especially to low-to-medium income customers as financial inclusion objective has been strongly emphasised moving forward.

Thriving interest of key global/regional financial centres in developing Islamic finance, for instance London, Hong Kong, Singapore Luxembourg, further adds weight to the strong prospects of Islamic finance as markets globally look for alternative sources of funding and investment avenues.

The Islamic finance industry’s assets are estimated to have amounted to $1.8 trillion as at end-2013, recording an over 16% y-o-y growth. Leading the growth has been the Islamic banking sector which represented an almost 80% share of the global Islamic banking assets in 2013. Among the largest global Islamic banking jurisdictions (excluding Iran) in 2013 are Saudi Arabia which captured 18% of global Islamic banking assets, followed by Malaysia (13%), UAE (7%), Kuwait (6%), and Qatar (4%). In 2014, the Islamic banking sector’s assets are expected to reach $1.6 trillion. Advanced Islamic banking markets in the GCC and Asian regions are expected to evolve in greater sophistication in terms of products offerings, as well as from the aspect of regulatory advancement by the financial regulators. On the demand side, Shariah compliant investments and financing products have been dominantly fuelled by a promising economic outlook in the GCC and abundant liquidity flows.

The industry will continue to grow driven by both demand and supply factors, and further facilitated by government agencies and financial regulators.

In a newly released report “Islamic Finance Outlook 2014” by Kuwait Finance House Research Limited (KFHR), the Islamic finance industry is forecasted to continue to chart tremendous double digit growth rates across all sectors, with total industry assets estimated to reach approximately $2.1 trillion as at end-2014. Over the next few years, KFHR foresee the industry’s focus in four key spectrums that will take the industry to greater heights:

1) Strengthening of financial stability and enhancement in  inter-linkages between Islamic finance jurisdictions.

2) Tapping into potential real sector economic activities to expand market share for e.g. by supporting the financing needs of the infrastructural development programmes in GCC and Malaysia.

3) Expanding the range of product offerings to appeal a wider customer base e.g. Islamic wealth management products for high net-worth individuals (HNWs) and Islamic trade financing solutions for corporates.

4) Enhancing talent, education and research development to improve on the industry’s efficiency and innovative capabilities.

In 2013, the sukuk market, managed to once again breach the $100bln mark in terms of new sukuk issuances to close the year with a total of $119.7bln. However the amount fell 8.77% short of the recorded amount in year 2012. Malaysia once again led the 2013 new sukuk with a 69% share of total issuances, followed by Saudi Arabia at 12%, United Arab Emirates (6%), Indonesia (5%) and Turkey (3%).

The global sukuk market is all set to continue its upward trajectory in 2014 as a number of high profile debut sovereign issuances are expected to take place this year. The sovereign sukuk sector will continue to stoke stakeholders’ interest in 2014 as sovereigns including the United Kingdom, Ireland, South Africa, Tunisia, Mauritania, Senegal, Luxembourg and Oman are expected to debut issuances in 2014.

Expectations are also build up on a debut sukuk issuance from the multilateral Asian Development Bank (ADB). Meanwhile, the Islamic Development Bank (IDB) has already announced its intention to issue a $10bln sukuk in the Dubai NASDAQ Exchange in 2014 with plans to continue similar listings on an annual basis.

The Islamic funds segment also registered an 8.4% year-to-date increase in 2013 with total assets under management (AuM) valued at $72.5bln as at 20-Dec-13. A total of 79 new Islamic funds were launched in 2013 with most of the newly launched Islamic funds domiciled Malaysia and Luxembourg.

In 2014, the global Islamic funds industry should benefit from steady global economic recovery which will bolster investor confidence and performance of underlying invested assets. Much of the anticipated recovery will come from the advanced economies, while the growth trajectory of emerging countries will remain stable. In this light, greater investor focus will be placed on policy decisions and reforms in individual emerging economies.

The global takaful industry has experienced strong double-digit growth rates in recent years with worldwide gross takaful contributions estimated to have amounted to almost $19.87bln as at end-2013, reflecting a more than 15% y-o-y growth while recording an impressive 18.1% CAGR during the last 5 years (2007-2012). Saudi Arabia and Malaysia continue to drive the global takaful industry being the two largest takaful markets in terms of total gross contributions.

(Albawaba Busniess / 09 Feb 2014)
Alfalah Consulting - Kuala Lumpur:
Islamic Investment Malaysia:

Latest Posts

Upcoming Events on Islamic Finance, Wealth Management, Business, Management, Motivational

Alfalah Consulting's facebook


Alfalah Consulting is NOT providing any kind of loan to finance project etc and asking for a fee. If you've received any email claiming to be from Alfalah Consulting, offering loan to you, please ignore it or inform us for further actions. Our official email is If you've received an email from, that's NOT from us. Be cautious!