Islamic Finance Malaysia

Monday, 30 December 2013

Growth of Malaysia's insurance, takaful sectors seen stable

KUALA LUMPUR: The growth of the insurance and takaful sectors for 2014 will remain stable amid domestic demand, said industry experts.
Takaful Malaysia group managing director Datuk Mohamed Hassan Kamil said strong growth prospects and improved risk management would lead to increased demand for insurance and takaful amongst the public at large.
He said the industry is anticipated to remain encouraging for both conventional and takaful operators through the introduction of new or enhanced and innovative products by insurance takaful companies.
“There is plenty of room for organic growth, given the fact that Malaysia still has low insurance penetration in both the conventional and takaful sectors.       
“In addition, we project a muted earnings growth outlook in certain areas of the local insurance and takaful industry arena that is likely to be impacted by investment de-risking and financial market volatility,” he told Bernama.
Regarding market players, he said the local insurance and takaful players are expected to utilise multiple distribution options available and develop alternative channels whilst strengthening their agency force to establish a solid foothold in the industry.
He said this will be supported by the implementation of strategic marketing and operating systems on top of competitive and cutting-edge products and services offered by respective industry players.
Hassan Kamil said despite the positive outlook, the industry will face diverse changes that were expected from the enforcement of the Risk-Based Capital (RBC) framework in 2014.       
“The RBC implementation might change the landscape of the takaful industry and the expected contribution growth is deemed to accelerate modestly, with fairly robust growth amongst takaful operators outpacing the conventional players,” he said.
Apart from that, both industries have been experiencing an influx of mergers and acquisitions (M&As) resulting in more foreign insurers tapping into the Malaysian insurance market, he said.
Amongst M&As this year were Khazanah Nasional Bhd’s partnership with Canadian-based Sun Life Financial Inc to acquire 98% of CIMB Aviva Assurance Bhd for RM1.8bil, and American International Assurance Bhd’s acquisition of ING’s insurance and takaful business in June 2013.
The industry has seen new players from Canada and the US coming into the Malaysian market, taking over the smaller local players.
“We have witnessed the emergence of financial solid players in the local insurance industry arena as a result of the M&A exercises.       
“The insurance and takaful industry in Malaysia remains encouraging for both life and general insurance and takaful despite moderating economic growth following the slowdown in major advanced countries,” Hassan Kamil said.
The persistent talent shortage, of professionals well versed in both principles, would be one of the main areas that need to be looked at critically in order to remain competitive in the industry, he said.
In addition, he said the rapid development of insurance and takaful industry has made it all the more difficult to recruit the right human capital needed for the various job functions. 
(The Star Online / 23 Dec 2013)
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Malaysia: Jeddah-based IDB plans to develop Islamic centre of excellence at Tun Razak exchange

KUALA LUMPUR: The Islamic Development Bank (IDB) is considering developing an Islamic Centre of Excellence at the Tun Razak Exchange in the Greater Kuala Lumpur here in three to five years, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said today.

He said the centre of excellence would provide services in Islamic finance and banking-related transactions.
The project would be developed in collaboration with the Malaysian government, he said.
"The Malaysian government has always viewed IDB not only as an international institution but also as a partner in charting our nation's growth," he said in his speech at the IDB High Level Regional Forum today.

(News Straits Times / 17 Dec 2013)

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Wednesday, 11 December 2013

Malaysia: UDA to work with Bank Muamalat in developing RM1b wakaf land

PETALING JAYA (Nov 12, 2013): UDA Holdings Bhd will work with Bank Muamalat (M) Bhd to develop 40.47ha of wakaf land with a gross development value of RM1 billion.
The land, ready for development, is spread throughout the country and owned by the respective state Islamic Religious Councils.
Bank Muamalat will provide the end financing for UDA to develop the land.
UDA Holdings group managing director Ahmad Abu Bakar said implementation of development projects on the wakaf land will be based on the concept of Ijarah or leasing.
"Through this concept of Ijarah, ownership of the land to be developed remains with the state Islamic Religious Councils, and only its usage will be transferred," he told reporters after the signing of a memorandum of understanding for the development of the wakaf land between Bank Muamalat and UDA Holdings, here today.
"UDA's model and springboard for the development of wakaf land on a commercial basis using the Ijarah concept, is based on the success in developing the 3.94ha belonging to the Penang State Islamic Religious Council," Ahmad said.
He said the development of wakaf land is still being fine tuned and UDA had also received letters of offer to develop such land in Selangor.
To realise the development of wakaf land, UDA acting as the developer, will underwrite the development costs, while also being responsible for marketing the projects.
"Development of the wakaf land will help add value as well as generate optimum returns," Ahmad said.
(The Sun Daily / 12 Nov 2013)
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Malaysia: Syariah-compliant securities will attract more Middle East investors: PM

KUALA LUMPUR: Prime Minister Datuk Seri Najib Razak is confident the introduction of shariah-compliant securities will attract more investments from the Middle East.

"With the onslaught of a new wave of investments, more job opportunities will be created and this will indirectly make our economy stronger," he said in his latest Facebook posting.
Najib, who is also Finance Minister, said luring foreign investments into the country was Malaysia's top priority towards becoming a high-income status  country.
"Based on this aspiration, the Securities Commission has introduced revised Shariah-compliant securities in order for Malaysia to draw more investments from the Middle-East," he said.
The Securities Commission announced yesterday an updated list of Shariah-compliant securities approved by its Shariah Advisory Council (SAC), based on the revised screening
methodology announced on June 18, 2012.
Under the revised screening methodology, SAC will adopts a two-tier quantitative approach which applies the business activity and financial ratio benchmarks. 
The revision took into consideration the rapid development taking place in Malaysia's Islamic finance industry since the Shariah screening methodology was first introduced in 1995. 
The revision will potentially spur greater inflow of foreign Islamic funds into Malaysian Shariah-compliant equities, thus expanding the Islamic capital market’s global reach, as outlined in the Capital Market Masterplan 2.
The updated list, which took effect yesterday, will feature a total of 653 Shariah-compliant securities which constitute 71 per cent of the 914 listed securities on Bursa Malaysia. 
The list includes 16 newly classified Shariah-compliant securities and excludes 158 from the previous list issued in May. 
To facilitate transition under the revised screening methodology, investors are given six months from Nov 29, being the effective date of the list of Shariah-Compliant Securities, to dispose off securities that are excluded from the list.
During the six-months period, dividends received and capital gains realised from the disposal of such securities may be retained by investors, without the need to channel any portion of the dividends and capital gains to Baitulmal and/or charitable bodies.

(News Straits Times / 30 Nov 2013)
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Monday, 9 December 2013

Islamic banking expected to 40% of Malaysia’s financial sector by 2020

Islamic financial business is at the heart of the Tun Razak Exchange (TRX) project, with some experts calculating that Sharia-compliant transactions could account for up to half of the business that will go through the new centre when it is complete.

Dato’ Azmar Talib, the chief executive of 1 Malaysia Development Berhad (1MDB), the real estate business overseeing the project, says Islamic banking comprises about a quarter of Malaysia’s domestic financial market in terms of assets and financing, but this is expected to reach 40 per cent by 2020, when TRX will be well developed.

“We intend to use Malaysia’s strengths, particularly in Islamic finance, to provide the infrastructure that will enable innovation, attract skilled talents and promote ease of doing business in the sector,” he says.

Others are even more positive about Kuala Lumpur’s potential in the global race to build the leading Islamic financial market. Many analysts believe the competition will come down to a three-way pull between KL, Dubai and London.

Malaysia has longevity on its side, and a developed domestic market. About 60 per cent of primary market sukuk (Islamic bond) issuance was in KL in the first half of this year.

Mohammad Daud Bakar, the chairman of the Sharia Advisory Council of Malaysia’s central bank, says the country has advantages in Islamic finance, such as a developed pensions funds industry, takaful (insurance) and long-term project finance.

“We have established private Islamic ratings agencies that vet the sukuk, and we are the only country with a Sharia-compliant equivalent of the American mortgage firms like Freddie Mae,” Mr Bakar says.

But despite the strength of the domestic industry, Malaysia faces some challenges in the international market. “Around 90 per cent of our issuance is in local currency, so we don’t trade in London. Malaysia has never issued any global sukuk. London uses hard currency, and has deep pockets of dollar reserves, which we do not,” he adds.

“But I believe the UAE will be a leader in this market in the future. It has dollar reserves and will be in a position to take business from London.”

Mr Bakar also points to the potential of the Saudi market. “It is booming because of all the infrastructure that needs to be financed there. It’s a booming market and will probably overtake KL in terms of value of issuance, if not volume,” he says.

(The National / 07 Dec 2013)
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Saturday, 7 December 2013

`Malaysia has the best Islamic finance module'

finance module' --> MANAMA ( Bahrain ): STANDARD Chartered Saadiq Malaysia (Saadiq Malaysia) believes that Malaysia's Islamic finance module is the closest to perfection and, as such, is utilising it to the betterment of its global operations. "There are best practices everywhere, butwe believe that Malaysia right now has the best module, and that's why we are bringing in talent from all over the world to learn this," Wasim Saifi , Saadiq Malaysia's chief executive officer and global head of Islamic banking, told Business Times at the World Islamic Banking Conference (WIBC), here, yesterday. "Right now, we are in the process of bringing in talent from our global branches to Malaysia in order to allow them to work and learn the Malaysian module so that when they go back in three years or so, they will be able to emulate the module in their countries," he said. Wasim noted that as of now, Saadiq Malaysia has already brought in two talents from Dubai , two from Pakistan , and two more from Bangladesh and Indonesia , respectively, in early next year. "We're not even looking at the numbers when it comes to bringing in talent into the country," he said, when asked how much investment Saadiq Malaysia was putting into the exercise. "It's really not an issue because at the end of the day, we can have all the technology and the products, but there's no point if we don't have the talent and the expertise to manage them," Wasim said, adding that the exercise, which started this year, will continue till 2015. He also said that Saadiq Malaysia is looking to aggressively grow its small- to medium- sized enterprise (SME ) segment next year, while also looking to raise its product disbursement via 32 existing Standard Chartered branches. "SME is always an important segment not only to Saadiq, but also the group. So we do have plans to increase this next year, but I can't reveal how just yet," he said. Wasim earlier participated in the CEO and industry leaders' power debate in "New Strategic Approaches to Revitalise Global Growth" and was a panelist in the "Expanding the Global Reach and Depth of Islamic Finance" session. The conference is now in its 20th year and saw the participation of 1300 delegates from 50 countries.

(HispanicBusiness.Com / 05 Dec 2013)
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Thursday, 5 December 2013

Malaysia: Support for Hong Kong Islamic financial market

PETALING JAYA: More measures to encourgae the development of the Hong Kong’s Islamic financial market, particularly the sukuk and the Islamic fund management industry were discussed during the first meeting of the Joint Finance Forum which was held in the special administrative region.
The forum was held yesterday following an agreement between the Hong Kong Monetary Authority (HKMA) and Bank Negara in August to strengthen collaboration between Hong Kong and Malaysia in the area of Islamic finance.
The forum participants agreed to identify potential sukuk issuers and encourage cross-border sukuk issuances between Hong Kong and Malaysia.
In particular, corporations located in the region could be one of the key sources of potential sukuk issuers.
“Hong Kong market players supported that sukuk should be offered as one of the possible options or solutions to their clients who have funding needs, as sukuk can be a means for potential issuers to expand their investor base.
“Participants also welcomed the initiative of the Hong Kong government to consider issuing sukuk, which will showcase Hong Kong’s Islamic financial platform to local and international issuers and investors,” said HKMA and Bank Negara in a joint statement.
The participants also agreed to consider launching Islamic funds and make use of the established mutual recognition framework for Islamic funds between Hong Kong and Malaysia to facilitate cross-border Islamic financial activities.
This will encourage a wider range of syariah-compliant fund offerings in Hong Kong and Malaysia.
The meeting also agreed to enhance the strategic financial linkages between Hong Kong and Malaysia aimed at facilitating cross-border investment flows and creating greater opportunities for investors from the region and other parts of the world, the statement said.
HKMA and BNM acted as facilitators, while the Financial Services and the Treasury Bureau of the Hong Kong Government, the Securities and Futures Commission and the Hong Kong Exchanges and Clearing Ltd also participated in the meeting.
(The Star Online / 04 Dec 2013)
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