TOKYO: Mitsubishi UFJ Financial Group (MUFG), one of the largest bank in the world, and a key player in Islamic Finance industry hailing from a non-Muslim country, has set up an RM20bil Islamic auto loan securitisation program in Malaysia, as it strives to tap into the growing Islamic Finance industry globally.
Because developing Sharia-compliant securitization products requires advanced Shariah knowledge and expertise, even major European and American financial institutions have yet to fully embrace the field. The Mitsubishi UFJ Financial Group unit’s program, one of the largest of its kind, amounts to 500 billion yen ($4.93 billion).
As a first step, the Japanese bank is set to issue 23 billion yen worth of Islamic bonds backed by loans claimed by Malaysian financial giant CIMB Group Holdings. A special-purpose company will handle the issuance, sell the bonds to pension funds and other institutional investors and pass the proceeds back to CIMB.
The market for Islamic finance in major economies is expected to grow 14% a year through 2020 to reach $1.8 trillion, according to Ernst & Young. European players are ahead of the game in the market, but Japanese banks have been a growing presence in the field in recent years. Mitsubishi Tokyo UFJ Bank is leading the Japanese banks in this regard.