ISLAMIC finance in Malaysia continued to register strong growth during the year. Total assets of the Islamic banking sector (including development financial institutions or DFIs) amounted to RM350.8bil as at end-2010, increasing by 15.7% from end-2009.
The Islamic banking sector now accounts for over 20% of the overall banking system in terms of assets, financing and deposits. In the Takaful sector, assets increased by 17.8% from 2009 to reach RM14.7bil as at end-2010.
Takaful assets now account for 8.7% of the total assets in the insurance and takaful industry.
Strategies to spur the development of Malaysia's Islamic finance industry continued to focus on developing the players. Infrastructure and expertise are required to meet the needs of the growing economy, and reinforcing Malaysia's position as a leading international centre for Islamic finance.
Bank Negara has granted four new family takaful licences to joint ventures between global and regional players and strong domestic entities. This was an increase from the earlier announced issuance of two new family takaful licences in 2009.
The decision to increase the number of licences took into account the overwhelming interest received in the new licences offered and the large untapped growth potential within the takaful sector.
Given Malaysia's demographic profile, the realisation of this potential is especially important to enhance the insurance and Takaful penetration rate.
All four new family takaful operators offer strong value propositions that are expected to significantly grow the family Takaful industry and further entrench Malaysia's position as the global hub for Islamic finance.
The formation of a high-level Law Harmonisation Committee last year to review, harmonise and further strengthen the legal infrastructure to facilitate the conduct of Islamic finance reinforces Malaysia's leadership role in building and maintaining a solid foundation for the development of Islamic finance.
The committee has a mandate to recommend legal reforms that will advance the development of Islamic finance and achieve greater certainty and enforceability of Islamic finance contracts domestically.
An important breakthrough in meeting the global liquidity management requirements of Islamic financial institutions was achieved with the establishment of the International Islamic Liquidity Management Corp.
This initiative marked the successful collaboration of 12 central banks and regulatory agencies, and two multilateral institutions to form a corporation that would be part of an international Islamic infrastructure to issue high quality instruments to support the liquidity needs of the global Islamic financial system.
Over the years, Bank Negara has pursued various initiatives to deepen the industry's syariah understanding as well as address issues in the application of syariah in Islamic finance. This includes the establishment of the Fund for Syariah Scholars in Islamic Finance amounting to RM200mil in June 2005.
In 2010, the fund supported talent enrichment, research and Islamic finance knowledge enhancement activities, which included the provision of scholarships for furthering Islamic finance studies.
TheStarOnline
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