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Islamic banking was first introduced in Malaysia in 1983, and now has an eight percent share of assets in the banking sector
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By
Kazi Mahmood, IOL
South Asia
Correspondent
KOTA
BARU, November 3 (IslamOnline)- The launch of the Islamic Financial
Services Board (IFSB) on Sunday was greeted with optimism in Malaysia
with several banks announcing the growth of their own Islam based
products, news services said on Sunday 3rd November 2002.
The
Central banks
from seven founding member Muslim countries Sunday launched the IFSB,
a regulatory body to oversee the booming Islamic investment market.
The governors from the Central banks of
Malaysia
,
Saudi Arabia
,
Indonesia
,
Iran
,
Kuwait
,
Pakistan
,
Sudan
and the Islamic Development Bank
were present for the launch.
The
establishment of the IFSB -- an association of central banks,
monetary authorities and other institutions responsible for
supervising and regulating Islamic banking
-- was "in response to the growing significance of the Islamic
financial services industry," officials said, according to the
AFP.
The
Islamic financial market worldwide is estimated to be worth 200
billion dollars and is growing at 15 percent a year.
The
system combines Islamic laws against interest payments with modern banking
principles.
While
bankers have hailed the IFSB as a major boost to Islamic banking and
finance globally, local Malaysian banks proudly announced the
tremendous growth of their own local Islam based products.
AmMerchant
Bank Bhd, or the Arab Malaysian bank said on Saturday it expected to
almost double the value of Islamic capital market products managed by
the company in the current financial year ending
March 31, 2003
compared with RM2.8bil managed in the previous year.
AmMerchant
had about 22% share of the Islamic capital market locally, which made
it the top among local merchant banks in this growing sector.
AM
merchant director for Islamic banking Mohamed Effendi Abdullah told
Malaysian newspaper the Star: “This year, we expect to
grow by 1.5 times from RM2.8bil worth of products – most of which
were Islamic private debt securities (PDS) – that we managed last
year.”
He
attributed the anticipated improvement to better demand and higher
awareness in the market towards Islamic banking, particularly among
the non-Muslims, in the country.
Abdullah
said that in the first eight months of this year, Islamic capital
market products constituted about 46.5%, or RM10.4bil, of the
RM22.4bil PDS issued.
“Today,
many people prefer Shariah-compliant capital market products
compared to the conventional PDS as it offers better rates and yields
and also because it suits their purpose. As a result, I believe that
this year, the total Islamic PDS issued in the country will exceed the
RM35.8bil issued last year,” he said.
Islamic
banking was
first introduced in mainly-Muslim
Malaysia
in 1983, and now has an eight
percent share of assets in the banking
sector. The government aims to raise the level to 20 percent by 2010.
Malaysia
's central bank
governor Zeti Akhtar Aziz is chairman of the IFSB steering committee.
According
to officials, the IFSB will set and disseminate standards and core
principles to supervise and regulate the industry in line with Sharia
principles for voluntary adoption by its members.
