gif Market Review Malaysia The Islamic Financial Hub Of Asia Source: GlobalIslamicFinanceMagazine.com


services around the world. One country in particular which has seen subsequent de- velopments in Islamic finance is the Islamic financial hub of Malaysia.


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Throughout the years Malaysia has made significant advancements in the sector and in 2009 it can be noted that it has con- tinued to command substantially between 50 per cent and 60 per cent of outstanding global su- kuk originated from the coun- try – more than those from the Gulf Cooperation Coun- cil (GCC) nations such as the United Arab Emirates (UAE), Saudi Arabia and Bahrain.


In global equity market and fund management, Malaysia has also been ranked first where syariah- compliant products now make up around 87 per cent of all se- curities listed on Bursa Malaysia. “It all started with the Islamic Banking Act 1983. The progress that we see today was triggered from that act,” related CIMB Islamic Bank Bhd’s chief executive officer Badlisyah Abdul Ghani.


Prior to Islamic finance, he observed that the nation was regarded as a ‘non-entity’ in the global financial market.“Islamic finance changed that. Malaysia is now officially rec- ognised as the premier hub for the industry. More significantly, it is all ‘inhouse’; mean- ing that beginning in 1983, all the infrastruc- ture, the regulatory framework, governance and mechanism are wholly laid out by Ma- laysians.


“So comprehensive is our framework that what we have here does not exist elsewhere. Under the regulations by Bank Negara, the Securities Commission, Bursa Malaysia and Labuan Financial Services Authority, Malaysia has a specific legislation and pro- vision for each of its financial segments,” explained Badlisyah. For Syarikat Takaful Malaysia Bhd’s managing director Datuk Mohamed Hassan Kamil, the core of Islamic finance remained at its openness and trans- parency. “It is a financial avenue for all –


66 Global Islamic Finance February 2011


slamic finance is a rapidly growing fi- nancial sector estimated to reach to over $2 trillion dollars by 2012. As 2011 is upon there is many expecta- tions from the Islamic financial sec- tor to further develop and improve


Muslims and non-Muslims alike. The ‘heart’ of Islamic finance concept still underline the transparency aspect across its mecha- nisms, structure right down to products. The obvious provisos are that there must be no transaction done that involves or originates from ‘haram’ (unlawful) businesses like win- ery or gambling.


already standardised across the globe. It should be the other way around. “It is im- portant that we should get rid of such confu- sion, as confusion would lead to uncertainty and further on, to speculation. Remember, these two aspects – known as ‘gharar’ – are stately prohibited in Islamic finance.”


Another major challenge for the sector was be the insufficient pool of talents, to which Mohamed Hassan referred to as a ‘major impediment’. “Together with lack of tal- ent development, there’s a ‘chronic’ talent shortage at the moment. However, I believe that this is a temporary impediment. As the talents con- tinue to grow and develop over the next five to 10 years, we should be able to overcome the setback.


“Also, there are several institutions in Malaysia, which have been devel- oped under Bank Nega- ra, that develop human talents in Islamic finance.


So, there are trainings un- dergoing today that deal with


fresh graduates as well as ex- perienced practitioners, slated for them to better understand the industry,” he listed out.


“The rest are ap-


plicable, so long they stay within the syariah principles,” he said..With a global industrial value estimated at around US$1 trillion (ap- proximately RM3.06 trillion), Malaysia could easily capitalise upon such strength with its expertise and offerings. However, one should not overlook that the industry was once ‘shaken’ ast year due to the Dubai debt standstill – indicating that as with the conventional system, the Islamic financial mechanism was not immune to challenges.


Malaysia was also ‘attacked’ by some Islam- ic countries some time ago when it approved and implemented the ‘bai bithaman ajil’ (deferred payment) concept in its financing which according to Badlisyah, was unneces- sarily ‘fuelled’ by misconceptions.


To this, Badlisyah pointed out that it was vital for people to learn and understand syariah and its application into Islamic finance. “They – financial practitioners and the public alike – cannot impose their personal views on how syariah works, since the system is


In a similar sentiment, Badlisyah further said, “you talk about human talent, what we do in Islamic finance is, basically, finance. So in order to be better at what we do now, people who know finance should also know syariah. Unfortunately, these are the very talents that we are critically lacking in the market.”On the bright side, Badlisyah dis- closed that it was a ‘good problem to have’.


“It further shows that the industry is growing really fast, resulting in we having to catch up in terms of human talents. Just as Malay- sia has a dual banking system; conventional and Islamic, we also need players and prac- titioners who have financial knowledge, at the same time also knowing how to go about doing it within the ambit of syariah.


“Efforts are being done by the authorities and our very own CIMB Islamic Bank. Upon achieving this, only then we can hold true to our status as the global Islamic financial oa- sis,” he said.


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