he first time talks about Mega Islamic Bank were started in late 2010, when Bank Negara Malaysia (BNM) announced that it will issue two licenses for commencement of two mega banks. Issuance of licenses for Mega Islamic bank is part of the roadmap towards making Malaysia an Islamic Finance hub.
The idea behind this plan is to set-up a billion dollar Islamic Finance institution in the country which could lead the local banks and represent Malaysian Islamic finance market in Global environment. Mega Islamic bank would increase the international dimension of Islamic finance in Malaysian financial system, which will enhance Malaysia’s global economic and financial interlinking with other parts of globe, in particular with the emerging economies and Islamic Finance centers. Mega Islamic bank would also entail size and economies of scale. Mega Islamic bank would help to set a right benchmark for the market.
License to set up a Mega Islamic bank has been issued by the central bank on June 24th, 2012, without naming the licensee. Initially the signal received by the public and other concerned parties was that the sponsors of Mega Islamic Bank would be foreign interested parties. Now BNM has also approached to the big public limited companies like Petronas and state pension fund Kumpulan Wang Amanah Pencen to make investment for setting-up the first Mega Islamic bank. Furthermore, BNM’s plan also involves in taking over Asian Finance Bank (AFB) (which is one of three foreign Islamic Banks in the country), and then converts it into Mega Islamic bank, which is a good idea as AFB has already established branches and business base.
Buying of AFB will save the start-up time of the bank and the number of market players would not increase as well. Dr. Mahatir has shown his support for the proposal of Mega Islamic bank being funded by the public companies, as he considers public company’s money as government money, and can be utilized the way government thinks that it would be better for country & general public.
Buying of AFB will save the start-up time of the bank and the number of market players would not increase as well. Dr. Mahatir has shown his support for the proposal of Mega Islamic bank being funded by the public companies, as he considers public company’s money as government money, and can be utilized the way government thinks that it would be better for country & general public.
In the view of an Industry practitioner, Islamic mega bank should start small and grow with the business growth. Capital should be added with the growth of assets, number of branches and as you expand beyond the local shores. Capital should be seen as function of business growth rather than putting the capital upfront.
There are already 17 Islamic banks operating in Malaysia, Which are deemed as too much with regards to Malaysia’s population of 28million. One view point is that opening of this new Mega Islamic bank would increase the competition as a whole, and this bank would have to compete with the big multinational banks like Citi bank, HSBC and Standard Chartered. That is why industry experts and analysts are of the view that the existing small local banks can be merged to make a bigger bank rather than opening a new one.
On the other it cannot be ignored that aside competition, this mega bank would also provide help and support to local banks. The target market of mega bank would not be restricted to local clientele but would be more focused on exploiting foreign avenues. Mega bank might also work as a harmonization point of standardization Islamic banking products beyond the borders of countries.
Setting-up of Islamic Mega bank is not a novel idea, as banking groups like Al-Rajhi group, Kuwait Finance House, Dubai Islamic Bank, Abu Dhabi Islamic Bank, Al-Baraka group and Qatar Islamic Bank have already crossed the hallmark capital of US $1 billion. According to Union of Arab bank’s magazine, a Bahrain based Mega Islamic bank with the capital of $1 billion might also be launched by the end of this year. The main sponsors of the bank would be GCC based Islamic banks.
Commencing a Mega Islamic bank in Malaysia has its own strengths and weaknesses, but its inception has become inevitable in order for Malaysia to become Islamic financial hub. Now, it’s the duty of central bank to take into consideration the points raised by the financial industry experts and act for greater betterment of Malaysian and Islamic finance industry as a whole.
0 Comments:
Post a Comment