Malaysia’s top banker said on Tuesday strategic alliances among Islamic finance players will help realise the global potential of the industry in the wake of increasing interest by several financial centres including Hong Kong in Islamic finance.
Addressing a two-day Islamic finance seminar here, Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said the tie-ups will lead to a more integrated international Islamic financial system and enable players to tap the immense markets of both Muslim and non-Muslim communities.
She said conventional financial institutions can also work together with Islamic financial institutions to raise sukuk or Islamic bonds, or structure other Islamic products which are syariah-compliant.
“The wide-ranging availability of such assets and the massive financing needs of the new growth areas in the region such as in China, Indonesia and Vietnam will be attracting funds from surplus economies such as from the Gulf economies,” she said in a keynote address on “Towards Gaining Global Growth Potential of Islamic Finance”.
Noting that the setting up of an Asian Sukuk Fund could be explored as an extension of the Asian Bond Fund, Zeti said: “Potential issuers may leverage on Malaysia’s sukuk platform and its strength as the world’s largest sukuk issuance centre with over US$56 billion (RM184 billion) or 62 per cent of the world’s sukuk issues.”
The sukuk market is the fastest emerging form of Islamic finance, increasing at an annual average rate of 40 per cent spurred by high levels of surplus savings and reserves in Asia and the Middle East.
In Malaysia, sukuk bonds had surpassed conventional bonds for three years running with an annual turnover of RM135 billion.
Zeti said Malaysia, with three decades of Islamic finance experience, is entering a new phase in developing the country as an international Islamic financial centre and becoming more integrated with the international financial system.
“This aims at strengthening our economic and financial linkages and thus promoting greater trade and investment across borders,” she added.
Zeti was optimistic that Islamic finance this year and beyond will remain positive despite the challenging global environment as it has the ability to meet changing economic demands, apart from being cost-competitive and having well-supported legal and regulatory frameworks.
“Islamic finance as a new industry requires more initiatives to expand the horizon of business parameters and innovative product offerings. There is a need to conduct further in-depth research on syariah issues relating to risk mitigation, liquidity management and hedging,” she said.