Islamic Finance Is Thriving In Malaysia, Says BNM Governor

KUALA LUMPUR (Aug 29): Malaysia’s Islamic banking industry is not phasing out of the limelight but is very much alive and kicking, gaining maturity and poised for further growth.

This is evident from statistics which shows that Islamic financing currently accounted for 34.1% of total financing (2008: 14.9%) while Islamic banking assets stood at 31.4% against a meagre 14% in 2008.

Going forward, further development of Islamic finance will increasingly be industry-driven.

“Islamic banking is not slowing down; rather, it has been growing. The industry is propelling growth on its own, penetrating new markets and increasing market share,” said Bank Negara Governor Datuk Nor Shamsiah Mohd Yunus in an exclusive interview with Bernama recently.

In response to comments of late that there was a lack of really solid development and momentum in driving Islamic finance, she reiterated that the industry not only continues to record healthy growth but is integrating social-finance in its product offerings.

This is to leverage the strengths of Islamic banking for greater accessibility, governance, and transparency.

“So, there is a lot of merits to ‘marry’ or merge these two. In Islam, we have ‘sedekah’ (voluntary charity) and zakat. Islamic banking can help intermediate these contributions to promote socio-economic development in the country,” she said.

By leveraging on Islamic banking and socio-finance, some of the product offerings such as sedekah, wakaf and zakat can be used to improve the livelihood of the marginalized or underserved groups, she pointed out.

In future, development initiatives for Islamic finance will focus on quality growth and value-adding to improving the livelihood of the people.

RAM Rating Services, in its latest edition of the “Islamic Banking Insight” publication released recently, said the Islamic banking sector was expected to grow between 10% and 11% this year, which is pretty much the same as the growth rate achieved in 2018.

The local rating agency said Islamic banking continued to expand at a much faster pace than conventional loans last year, coming in at 11% compared with the latter’s 3.3% growth. It grew at 10.3% in 2017.

For 2019, RAM is maintaining a stable outlook for the Malaysian Islamic banking sector in line with its positive view of the overall domestic banking system.

Originally published on www.theedgemarkets.com