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Sunday, 9 October 2011

Malaysian Islamic Banking Assets Rise 15 Percent to $123 Billion

7 Oct. 2011(Bloomberg) -- Malaysia’s Islamic banking assets rose 15 percent to 389.3 billion ringgit ($123 billion) in the first seven months of 2011, strengthening the country’s position as the global hub for Shariah-compliant financing, a government report said.
Assets that comply with Islam’s ban on interest climbed to 21 percent of Malaysia’s total banking system in July from the same period a year earlier, according to the Ministry of Finance’s 2011-2012 Economic Report today. Islamic lending increased 17 percent to 246.8 billion ringgit and made up 23 percent of total loans, while deposits grew 14 percent to 299.1 billion ringgit, the report said.
“Malaysia has the most established Shariah regulatory and legal infrastructure” in the world, the report said. “The Islamic capital market now exceeds $1 trillion and is growing as rapidly as the conventional capital market.”
The Southeast Asian nation, where about 60 percent of the 27 million population are Muslim, has relaxed foreign-ownership rules for Islamic institutions in the past few years to attract investment and spur growth in the biggest market for Shariah- compliant bonds, or sukuk. The nation has $112.3 billion of such debt outstanding, 62.7 percent of the world’s total, the ministry said.
‘Risk Management’
Global sales of sukuk, which pay returns on assets to comply with Shariah law, climbed to $18 billion this year, from $11.8 billion in the same period of 2010, according to data compiled by Bloomberg. The debt is outperforming bonds in developing markets this year, with a return of 5.3 percent, the HSBC/NASDAQ Dubai US Dollar Sukuk Index shows. Fixed-income securities in emerging markets gained 3.4 percent, according to JPMorgan Chase & Co.’s EMBI Global Composite Index.
Malaysia will continue efforts to strengthen the nation’s position as an international Islamic financial center by developing tools to help facilitate cross-border transactions as well as products and services, the ministry’s report said, without providing further details.
Islamic insurance, or takaful, assets rose 17 percent to 16.3 billion ringgit at the end of July from the same period last year, according to the report. The sector accounted for 8.7 percent of Malaysia’s total insurance industry as of July 31, up from 8.3 percent a year earlier, the ministry said.
Takaful is based on the Koranic principle of mutual assistance where members are the insurers as well as the insured.
The finance ministry said five new guidelines to further enhance “sound risk-management practices” in Islamic insurance were issued in the first seven months.
The worldwide Islamic finance industry has expanded 20 percent annually since 2000 and is among the fastest-growing in global banking, according to the Kuala Lumpur-based Islamic Financial Services Board, an international standards setting body.

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