Infrastructure projects to boost Malaysia’s lead role in Sukuk mart

KUALA LUMPUR: The infrastructure projects to be launched in Asean and the Middle East and North Africa (Mena) regions will continue to put Malaysia as the champion in the sukuk market next year, said CIMB Islamic Bank Bhd.

Its Executive Director and Chief Executive Officer Badlisyah Abdul Ghani said the sukuk market will perform positively in 2014, with a projection of between US$42bil (US$1=RM3.25) and US$48bil of new issuances led by Malaysia and Saudi Arabia.

“Other new developments coming in from the United Kingdom, Hong Kong and one or two other countries in North Africa are likely to add to the excitement in the market next year…The momentum will continue,” he told Bernama.

According to Badlisyah, sukuk has continued to perform positively in Malaysia throughout 2013 with a year-to-date total sukuk issuance of about RM37.4bil.

CIMB Islamic has so far topped the lead manager league table after arranging RM9.70bil worth of sukuk issuance, garnering a 25.9% market share.

The Finance Ministry in its Economic Report 2013/2014 released in October said Malaysia remained the global leader in the sukuk market, accounting for 70.5% of the US$75bil of new sukuk issued globally in the first 10 months of the year.

Meanwhile, on the overall Islamic finance’s outlook for next year, the International Centre for Education in Islamic Finance (Inceif) Chair, Prof Dr Abbas Mirakhor said Malaysia would undoubtedly maintain its position as the flagship for Muslim countries in pushing the envelope of Islamic finance.”This is as long as Bank Negara Malaysia continues its dynamic leadership in innovating initiatives to develop practical and careful steps to sharpen the definition, as well as implementing policies that move the process forward toward convergence with the ideal Islamic finance,” he said.

Abbas said the newly introduced legal framework by the central bank, the Islamic Financial Services Act (IFSA), was among the important achievements in Islamic finance that will serve as a model for other Muslim countries.

IFSA, which came into force in July, is the framework for Islamic banking and takaful to modernise the previous laws that govern the conduct and supervision of the Islamic financial institutions in the country.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz said IFSA would pave the way for the development of an end-to-end Shariah-compliant regulatory framework for the conduct of Islamic financial operations.

“It would provide clarity on the fundamental requirements of Shariah that must be adhered to for the contractual arrangements between the financial institution and the customer to remain enforceable.

“It will also outline the operational requirements for the effective application of Shariah principles in the conduct of Islamic financial institutions,” she said in her speech during the Brunei Darussalam Islamic Investment Summit.

According to Zeti, the innovation in Islamic finance had resulted in a wide range of products and services that are increasingly meeting the demands of an economy, and among the financing products offered included syndicated financing, equity financing and venture capital and a wide range of investment and treasury instruments.

“IFSA will cause some changes to the current functioning of the Islamic banks, more particularly in the type of contracts used for both deposits and financing, and this will result in additional efforts and investments in 2014 and 2015,” Standard Chartered Saadiq and Global Head Chief Executive Officer Wasim Saifi meanwhile said.

“But for longer term, the act does provide a more robust governance framework for the industry and will help us build a more sustainable industry and business.”

He said the decision of other financial centres like London and Hong Kong to play an active role in Islamic finance would further strengthen the outlook for the industry, and Malaysia being the key centre of Islamic finance will surely benefit from the higher profile and wider reach of the industry.

At the ninth annual World Islamic Economic Forum in London on October 29, British Prime Minister David Cameron announced that he wanted to see London standing shoulder-to-shoulder with Dubai and Kuala Lumpur as one of the great global centres of Islamic finance.

In saying this, he declared that he intended Britain to become the first non-Muslim state to issue sukuk – Islamic bonds that are structured in such a way that they do not infringe upon Shariah law.

Out of 20 countries worldwide, Malaysia was ranked third in terms of total Shariah-compliant assets at US$196.820mil, with 41 institutions offering Shariah services, representing 63.7% of the total population. – Bernama
*This article was published by The Star Online on 23 December 2013. Read the original article here.