Malaysia

Potential of Islamic capital market remains promising at home and abroad – Bursa chairman

According to Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, the potential of the Islamic capital market remains promising both in Malaysia and abroad. During his keynote address at the Shariah Investing Virtual Conference 2020 Abdul Wahid said that in Malaysia alone, the industry of Islamic funds had demonstrated impressive growth. As of March, syariah funds stood at RM170 billion, representing 23% of total industry assets under management (AUM). Syariah unit trust funds' net asset value (NAV) stood at RM99 billion. Abdul Wahid added that there are opportunities for further product innovation and development to provide investors with more syariah-based products.

#Malaysia’s Islamic finance sector to hit RM3t this year, says Bursa chairman

Malaysia’s Islamic finance sector is expected to sustain double-digit growth to reach almost RM3 trillion in 2020 under the second Capital Market Masterplan. The chairman of Bursa Malaysia, Tan Sri Abdul Wahid Omar, said the country’s Islamic funds industry has demonstrated impressive growth. The country is the third-largest market for global Islamic finance products and the world’s largest Sukuk issuer. At Bursa Malaysia 79% of the listed companies are Shariah-compliant and Shariah market capitalisation makes up 70% of the total market capitalisation of RM1.6 trillion. Over the last ten years Shariah indices consistently outperformed its conventional counterparts. Thus, Shariah-compliant investments are an attractive source of value for investors.

‘Hibah’ best tool to resolve Muslim inheritance issues: Experts

When Muslims fail to draw up a will outlining the proportion of distribution of their assets to their heirs, families resort to faraid, the Islamic law of inheritance, which can lead to disputes. According to sociologist Prof Datuk Dr Mohammad Shatar Sabran, many Malays are still not aware of the importance of naming the heirs to their estate beforehand. The concept of hibah would be an alternative and more effective way. It refers to the transfer of legal and beneficial ownership of assets from the donor to the beneficiary on a voluntary basis, with the proportion and distribution to heirs and non-heirs being determined by the donor. Money left in accounts without the hibah instrument is categorised as part of the estate of the deceased account holder and, as such, the heir will have to go through a lengthy application process to claim the money.

Loan moratorium: Borrowers need to inform banks on consent, says finance minister

Malaysian borrowers who wish to continue with the six-month moratorium need to inform their respective banks of their consent via the banks’ designated platforms. Although the moratorium is automatic starting April 1, the borrowers’ consent is still legally required. Bank Negara Malaysia (BNM) said starting from May 1, bank customers with hire-purchase loans and fixed rate Islamic financing will receive a notification on the steps they must take to complete the deferment process under the six-month moratorium on loan and financing payments. Customers will be notified via SMS, email or registered mail from their banking institutions.

RAM Ratings: #Takaful industry’s strong capitalisation sufficient to withstand headwinds

RAM Ratings Services has maintained its "stable" outlook on the Malaysian takaful industry for 2020 despite the economic slowdown. Its Financial Institution Ratings co-head Sophia Lee said the industry’s strong capitalisation is sufficient to withstand headwinds. In 2019, the family takaful’s new business contributions grew 25% to RM6.2 billion, an additional 13% from 2018, mainly driven by the MySalam initiative, the national health protection scheme. Excluding MySalam, growth was still commendable at an estimated 16%, anchored by credit-related takaful products and the employee benefits. Similarly, the general takaful industry expanded by a strong 20% in 2019, led primarily by the motor business.

A new normal will require Islamic fintech to address financial inclusion

The COVID-19 pandemic has been an unexpected catalyst for digitalisation and this global crisis now may well be a boon to businesses promoting digital financial inclusivity. Approximately 40% of startups will not survive if the COVID-19 crisis continues after May 2020, according to a recent news report. Malaysia is now a nucleus for Islamic digital economic activity comprising of digital products and services catering to the Islamic crowd. The country has developed world-class regulation, driving new initiatives to accredit halal certifiers worldwide, granting the first Islamic fintech crowdfunding license and launching a new certification scheme for Muslim friendly hospitality. Islamic Fintech and Islamic Digital Economy encourage financial inclusivity by increasing awareness and providing access to SMEs through digital financial instruments.

RM100b corporate bonds, #sukuk issuances to be expected

The Securities Commission Malaysia (SC) is expecting up to RM100 billion worth of corporate bonds and sukuk issuance this year. The regulator said the Covid-19 outbreak and the resultant disruption on businesses have affected fundraising activities. Thus any non-payment of profit arising from the current challenging operating landscape is very likely due to credit rather than Shariah issues and would therefore be dealt with from a credit perspective. SC deputy CEO Datuk Zainal Izlan Zainal Abidin said that Malaysia continues to maintain its leadership in the Islamic capital markets (ICMs). The SC noted that ICM represented 63.57% of Malaysia’s capital market, with market size of RM2.04 trillion as of December 2019, an 8.23% growth over 2018. The SC added that the Islamic fund management industry also witnessed new and innovative investment product offerings. These include Islamic exchange-traded funds based on gold, SRI Islamic funds, as well as social and green sukuk.

#Malaysia’s BIMB Investment launches Shariah-ESG robo-advisor

BIMB Investment launched a robo-intelligence investing platform focused on sustainable and Shariah-ESG assets. BEST Invest will give investors access to a suite of BIMB Investment’s Shariah-ESG unit trust funds across asset classes including global equities, Asia Pacific equities, sukuk, and money market. BIMB Investment became an official signatory of the United Nations-supported Principles for Responsible Investment (UNPRI) in July last year. At the time, the company’s CEO said it had integrated more than 250 ESG metrics in its investment process since 2015. The new robo-advisor will allow users to either start investing for themselves or enable the system to identify and select the best investment methods. Investments start at 10 ringgit with a zero sales charge.

Islamic investments a more stable choice in uncertain times

According to Malaysian Principal Islamic Asset Management CEO Datuk Syed Mashafuddin Syed Badarudin, Islamic investments are less volatile than their conventional counterparts and may be a better choice for investors during times of uncertainty. He notes that the increased uncertainty from the coronavirus outbreak has led to financial market volatility not seen since the last global financial crisis. Asean countries, including Malaysia, have already cut policy rates in response to the turmoil. Based on real interest rates in the region, there is more room for rate cuts and this bodes well for bond prices. Badarudin expects that market conditions will continue to be volatile until some stability is seen regarding the virus situation. He expects Principal Islamic to increase its asset size this year despite the more challenging economy.

Maybank Islamic’s new Dubai branch sets out to attract Gulf investors to Southeast Asia

Maybank Islamic’s move into branch banking in the Middle East aims to attract Gulf investors to Southeast Asia. The Malaysian bank opened its first overseas branch at Dubai International Financial Centre (DIFC) in February. Maybank Islamic deputy CEO Nor Shahrizan Sulaiman said the new Dubai branch would serve as a the bank’s gateway not just to the UAE but to the wider GCC. The bank pursues further growth in Singapore and Indonesia, which it sees as home markets outside of Malaysia. The international business expansion is not new, as it has always been one of the focus areas of Maybank Islamic from early on. Maybank Islamic was granted a full Islamic banking licence from the Dubai Financial Services Authority last July, allowing it to open the DIFC branch. It replaces Maybank Islamic’s office in Bahrain, which has closed down.

Etiqa gives RM1mil to buy ventilators

Etiqa is contributing RM1mil for the purchase of ventilators through Mercy Malaysia’s Pandemic Fund to support strategic preparedness and response plan to the Covid-19 virus. This initiative will also help ensure all communities are well prepared, especially those with the weakest health systems. With the number of people infected with Covid-19 increasing in Malaysia, the number of ventilators available at designated hospitals will be insufficient to deal with the number of critical cases. Etiqa Insurance & Takaful Group CEO Kamaludin Ahmad feels obligated to help the country battle Covid-19 and hopes that this contribution will mean that no patient will have to be denied lifesaving care due to ventilator shortage.

Covid-19 fund amassed RM8.1m in donations

THE Covid-19 fund, launched by Malaysian Prime Minister Tan Sri Muhyiddin Yassin on March 11, received a RM5 million contribution yesterday. The donations came from Spanco Sdn (RM2 million), followed by DRB-Hicom, MMC Corp and YTL Corp who contributed RM1 million each. Property developer Titijaya Land has contributed 520,000 face masks for frontliners. With the above donations, the fund has amassed a total of RM8.13 million in contributions. The government has launched the Covid-19 fund to help affected Malaysians. Similarly, the Malaysian Department of Islamic Development has also launched another fund to help the Muslim communities affected by the outbreak. Separately, some Malaysians are criticising the setting up of funds and are calling on ministers to take pay cuts instead.

#Sukuk issuance stalls on subdued economy

Sukuk issuance could potentially take a hit this year, dragged by subdued economic growth. In 2018, when Malaysia’s GDP growth slowed to 4.7%, sukuk issuances fell by 2.6%. In 2019, when real GDP growth moderated further to 4.3%, sukuk issuances slipped by 2.3%. However, the current low interest-rate environment will prevent sukuk issuances from falling too significantly this year. According to Malaysia Rating Corp (MARC) chief economist Nor Zahidi Alias, the downside risk remains especially if the Covid-19 outbreak continues to be unmanageable and lockdown periods across global economies continue. Policymakers globally are using fiscal and monetary tools to soften the impact of the Covid-19 outbreak. The US Federal Reserve’s move to lower its benchmark to a near-zero rate prompted central banks across many sukuk active markets to cut their interest rates.

Shariah gold ETF rises as safe havens in demand

Malaysian Affin Hwang Investment Bank expects gold prices to average higher in 2020, helped by sustained accommodative monetary policies among major central banks. Using the TradePlus Shariah Gold Tracker exchange-traded fund (ETF) as an avenue to invest in the precious metal, Affin Hwang believes the ETF’s fair value is RM2.30. In 2019, the price of gold surged by 18.9% year-on-year (YoY) to US$1,523.1/oz compared to a decline of 2.1% in 2018 to US$1,309.3/oz. In the near term, Affin Hwang Capital believes concerns over the recent Covid-19 outbreak will likely continue to drive safe-haven flows into gold. Due to geopolitical concerns and low-interest rates, the World Gold Council noted that holdings in gold-backed ETFs hit an all-time high of 2,885.5 tonnes in 4Q19 compared to 2,858.8 tonnes in 3Q19 mainly from North American and European-listed funds.

Digital platform to drive takaful demand

Malaysia has firmly established itself as an Islamic hub in the world through leadership and innovative product offerings. As such, the creation of an Islamic finance-enabling ecosystem is the key driver of the Malaysian takaful industry’s growth. The takaful sector continues to enjoy faster growth than the conventional insurance sector. Family and general takaful premiums rose by 29.6% and 16.4% respectively in the first half of 2019 (1H19), compared to 12.2% in conventional life and -1.3% in general insurance. However, surverys show that almost half of the Malaysian population does not have protection due to a lack of awareness. According to Fitch Ratings, takaful operators should rethink the way these products are positioned to entice a larger crowd looking for general protection through the use of digital applications.

Indonesian Islamic P2P lender Ammana Fintek Syariah eyes international expansion starting with #Malaysia

Indonesian Islamic peer-to-peer lender Ammana Fintek Syariah is keen on entering international markets and is starting its expansion with neighbouring Malaysia. Ammana is also eyeing Brunei and Dubai as part of its international expansion. The Shariah-compliant fintech is in the process of applying to become a member of the international Islamic finance standards body the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Ammana Fintek Syariah was established in July 2017 and disbursed 17.6 billion rupiah ($1.29 million) in financing in 2019.

Qatar- Malaysia builds framework for digital Islamic banks

Malaysia's central bank Bank Negara Malaysia is pushing the financial sector to join the digital banking revolution. It is preparing the issuance of the country's first five digital banking licences. Digital banks also named virtual banks, neobanks or challenger banks predominantly deliver banking services through digital channels such as Internet portals and smartphone apps with minimal, if any, brick-and-mortar presence. Among the largest standalone digital banks globally are currently N26 from Germany, Monzo, Starling and Revolut from the UK, Chime from the US, Tangerine from Canada, Nubank from Brazil, Neat from Hong Kong and WeBank from China. In the Islamic financial industry examples are insha, a co-operation of Turkey's Albaraka Turk Participation Bank with German solarisBank, and some others such as Boubyan Bank. Adding to this, Qatar Islamic Bank as part of its digital transformation has developed a fully digital financing services arm. Malaysia could potentially join with digital Islamic banking services in case Maybank and CIMB receive digital banking licences.

CIMB Islamic contributes RM1 million for conservation efforts of Setiu Wetlands

CIMB Islamic Bank has committed RM1 million per year, renewable annually for up to 3 years for the conservation efforts of Setiu Wetlands, Terengganu. The three-year project with a total potential commitment of RM3 million, is in collaboration with World Wide Fund for Nature Malaysia (WWF-Malaysia). The project contributes towards safeguarding Setiu Wetlands’ healthy and functioning ecosystem by establishing a critical knowledge base to guide sustainable development. This is CIMB’s third collaboration with WWF-Malaysia on strategic conservation projects, subsequent to the project in Ulu Muda, Kedah, and in Ba’ Kelalan and Long Semadoh in Sarawak.

Evolving Islamic fintech

In this interview Stalla Cox CBE, the Managing Director of DDCAP speaks about her company and the evolving Islamic fintech scene. DDCAP Group was established over twenty years ago and has always selected its global expansion strategically. DDCAP opened in the Dubai International Financial Centre (DIFC) in 2008. Following the turn of 2000, there was significant repatriation of Shari'ah compliant capital to the Middle East. At a similar point in time, DDCAP was also invited by Bank Negara Malaysia to join a steering group that was formed in response to the Malaysian financial authorities granting permissions to Islamic banks from the GCC to do business locally. Consequently, a regional office was opened in Kuala Lumpur, Malaysia. The global financial services industry is moving at an incredible pace. With ETHOS AFP, DDCAP managed to create an enabling platform with global reach and provides a fully integrated treasury trading workflow for Shari’ah-compliant transactions.

Alliance Islamic Bank Launches Halal in One Programme

Alliance Islamic Bank launched its Halal in One Programme, a halal enterprise ecosystem that aims to help small-and-medium enterprises (SMEs). The programme offers business owners solutions like business advisory, business matching services, and shariah-compliant financing. Alliance Islamic signed a memorandum of understanding with its strategic partner HQC Commerce Sdn Bhd (HCSB) in conjunction with the launch of Halal in One Programme. Alliance Islamic CEO Rizal IL-Ehzan Fadil Azim said SMEs in Malaysia have the advantage to tap into the global halal segment, where 90% of SMEs are not certified. He said Alliance Islamic's Halal in One Programme offers business advisory to help SMEs obtain halal certification from the Department of Islamic Development Malaysia.

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