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Sunday, 19 October 2008

Islamic Fund and Wealth Management - Malaysia's Value Propositions

Malaysia’s in-depth experience and solid fundamentals in Islamic finance developed over more than 30 years, offers strong value propositions to foreign fund managers to establish Islamic fund management operations in Malaysia.

Strategic Location

Malaysia, with its strategic location serves as a link between the East and West. The country is well positioned to facilitate cross flow of funds and greater economic linkages between South East Asia and the Middle East. Foreign players who wish to seize the opportunity of these largely untapped and fast growing markets will find Malaysia an excellent gateway for this purpose.

As the economies of these regions continue expanding, Malaysia is expected to play a pivotal role as a regional financial hub and gateway, particularly for transnational investments and the sourcing of funds.

Through its various global economic inter-linkages, Malaysia provides players with access to the financial pipelines of the region to tap surplus funds and the wealth of high net worth investors.

Adopt Global Legal and Regulatory Best Practices

Malaysia’s legal framework caters for Islamic finance matters. There is a dedicated judge at the High Court level for Islamic finance matters. The Kuala Lumpur Regional Centre for Arbitration has specific capabilities to deal with Islamic contract matters. This legal framework enables the enforceability of Shariah based contracts for Islamic finance while providing governance and legal redress for Islamic financial institutions. It also provides for strong investor protection.

In particular, the Capital Market Services Act 2007 (CMSA) defines the parameters for permitted capital market activities in Malaysia, while reinforcing the protection framework and promoting international best practices among financial institutions. These and other such regulatory guidelines have been instrumental in providing industry consistency and clarity for the Islamic Capital Market (ICM) in Malaysia. In addition, Malaysia’s regulatory guidelines have also set benchmarks for other countries in developing their own Islamic Capital Markets (ICM).

The legal and regulatory framework is constantly reviewed taking into consideration latest market, products and Shariah issues to ensure continuous development in the ICM.

Well Developed Shariah Governance Framework

The Securities Commission Malaysia (SC) has established a centralised Shariah Advisory Council (SAC) to advise on issues related to the Islamic Capital Market (ICM). The approach was taken, by recognising the importance of Shariah compliance in the Islamic financial system which possesses distinctive characteristics when compared to the conventional system.

The SAC is also responsible for analysing specific issues related to the operations of ICM, to provide guidance and advise to investors, the government and industry.

Wide Range of Innovative Islamic Investment Products

Malaysia’s Islamic Capital Market (ICM) is home to a wide range of investment products. These products provide a competitive playing field for investors and fund managers seeking to diversify their portfolio.

Some of Malaysia’s notable ICM products are sukuk, Shariah-compliant securities, Shariah-based unit trust funds, Islamic REITs and Islamic ETF.

Please refer to investors section for a comprehensive list of Islamic capital market products.

Liberal Foreign Exchange Administration (FEA) Rules

Malaysia’s liberalised foreign exchange administration rules enhance Malaysia’s competitiveness and business efficiency, while promoting financial and economic stability.

The relaxation in rulings was made in tandem with the readiness of the Malaysian economy to support the country’s growth and competitiveness, whilst creating a conducive business environment for international financial institutions.

Apart from enhancing Malaysia’s competitiveness and business efficiency, the liberal FEA rules enabled greater trade in foreign currencies. Foreign Islamic fund management companies are allowed to invest all their assets abroad under the facilitative cross-border investment policy. In addition, they are allowed flexibility to swap domestic currency funding into other currencies.

Please refer to Foreign Exchange Administration (FEA) rules for more information.

For more information on Malaysia’s value propositions, please refer to Discover MIFC section.


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Islamic Financial Planning & Wealth Management by Ahmad Sanusi Husain