Friday September 9, 2011
Mizuho seeks licence to offer syariah-compliant services
KUALA LUMPUR: Banks from Japan to Bahrain plan to set up offices in Malaysia to take advantage of the growth in Islamic finance assets in the world’s biggest sukuk market.
Mizuho Financial Group Inc, based in Tokyo, has applied for a licence to offer foreign-currency Syariah-compliant services in the country, Keizo Ohashi, chairman of Japan’s third-largest lender, said on Sept 5. Bahrain’s Elaf Bank B.S.C. was granted a similar licence in June, while Asia’s first multinational Islamic bank will be set up in the nation this quarter, according to Bank Negara.
Banking assets in Malaysia that comply with Syariah law grew an average 20% annually since 2006 to reach RM350.8bil at the end of 2010. Malaysia accounts for 66% of the global Islamic bonds, according to the central bank. Malaysian tax incentives and regulations have helped bolster the market, according to RAM Ratings Services Bhd.
“By having Syariah-compliant financing operations in Malaysia, foreign banks like Mizuho will find it easier to tap into the Islamic market,” Zakariya Othman, head of Islamic ratings at Kuala Lumpur-based RAM, the larger of the nation’s two ratings companies, said in an interview on Wednesday.
“Malaysia, with 17 million Muslims, also has a ready market and attractive incentives.”
Bonds that comply with Islam’s ban on interest returned 7% to investors this year, while the MSCI World stock index has lost 8.3% as investors seek safer assets amid concern the debt crisis in Europe is worsening and that there is a risk of another recession in the United States.
The Bloomberg Malaysian Sukuk Ex-MYR Index, which measures 10 foreign-currency Islamic bonds sold by companies and governments in the country, rose 7% this year and reached a record 105.4980 on Aug 18. The gauge gained 0.1% to 105.4780 yesterday. The FTSE Bursa Malaysia KLCI Index has dropped 3.5% in 2011.
Malaysia, which pioneered Islamic finance 30 years ago, is due to unveil its plans to start a cross-border clearance platform and to issue a licence for an Islamic “megabank” this month, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said in July.
Malaysia also plans to sell Islamic bonds, known as sukuk, to fund a RM48bil rail project under its US$444bil development programme, Prime Minister Datuk Seri Najib Razak said in March.
“Mizuho’s interest in having Islamic operations in Malaysia suggests even Japanese banks are realising the importance of Islamic finance,” Nik Norzrul Thani, chairman and senior partner of Kuala Lumpur-based legal firm Zaid Ibrahim & Co, said in an interview on Wednesday.
“It also shows Islamic finance is now an important component in international banking worldwide,” he said. — Bloomberg