Business

Tuesday November 10, 2009

New Islamic banking licences under process


Awang Adek: Keen interest to set up Islamic banking operations in Malaysia

KUALA LUMPUR: The applications for two new Islamic banking licences, which are part of the financial sector liberalisation plan, are still being processed, according to Deputy Finance Minister Datuk Dr Awang Adek Hussin.

“Bank Negara at the moment is processing the applications and making the necessary evaluations. The decision will be made by the central bank in the best interest of the financial sector.

“I was informed that there have been quite a number of applications as well as keen interest from other players to set up Islamic banking operations in the country,” he told a press briefing in conjunction with the Islamic Financial Planning and Wealth Management Conference 2009 (IFPC 2009) here.

In April, the Government announced a financial sector liberalisation plan that included the issuance of licences for seven banking and two takaful players from this year until 2011. It also, among others, eased foreign ownership rules by increasing limits of equity ownership to 70% from 49% for investment banks, Islamic banks, insurance companies and takaful operators.

From left: Financial Planning Association of Malaysia president Wong Boon Choy, Organising Committee IFPC 2009 chairman Datuk Ibrahim Muhammad, Datuk Dr Awang Adek Hussin and Islamic Banking and Finance Institute Malaysia CEO Datuk Dr Adnan Alias at the opening of the IFPC 2009 conference on Monday.

On whether there would be further liberalisation in the financial sector, Awang Adek said it would be done in stages and more would come over time.

“When the time is right and we think we are ready for the next step, we will take it. I don’t think this is the end of liberalisation,” he said.

He noted that the Islamic banking sector had registered double-digit growth over the past eight years with an average annual growth rate of 20% in terms of assets.

As at end-June, the share of Islamic banking assets in the banking sector had expanded to 19% from 6.9% in 2000. Given the growing maturity of the local bond market, Awang Adek said it was timely that Malaysia offered its own “brand proposition”.

This was to distinguish foreign currency-denominated bonds and sukuk originating from the country in global capital markets, he said.

He added that Petroliam Nasional Bhd had become the largest issuer of US dollar-denominated bonds and sukuk in Asia ex-Japan with the issue of US$3bil worth of bonds and US$1.5bil of sukuk.

Awang Adek also called on Islamic and conventional advisors, including financial planners, to capitalise on the potential growth of syariah-compliant financial sectors, such as the financing-protection segment, where previously Muslims were not able to participate due to a lack of syariah-compliant products.

The increasing demand for Islamic financial products necessitates financial planners to be equipped with the knowledge of syariah requirements of Islamic finance and such expertise was a potential area for growth, he said.

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