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Wednesday January 16, 2013

Islamic finance future brighter than ever

<B>Growing assets:</B> Nazrin (right) and ZICOlaw chairman Datuk Dr Nik Norzrul Thani
at the book launch. – Bernam Growing assets: Nazrin (right) and ZICOlaw chairman Datuk Dr Nik Norzrul Thani at the book launch. – Bernam

KUALA LUMPUR: The future of Islamic finance following the global financial crisis in 2008 is even “brighter than before”, said the Regent of Perak Raja Dr Nazrin Shah.

The industry has expanded by 15% to 20% per annum since the 1990s and now amounts to over US$1.2 trillion (RM3.61 trillion) globally, said Nazrin, who is also the Financial Ambassador of Malaysia’s International Islamic Financial Centre.

“While this is less than 1% of global financial assets, it is expected to quadruple in the next decade,” he told participants at the launch of a book co-authored by lawyers from the ZICOlaw network entitled An Introduction to Islamic and Conventional Corporate Finance.

“Whereas before, oil-rich countries had few avenues to invest their surpluses in Islamic instruments, today, these are a distinct and rapidly growing asset class.

“At present, there are more than 300 Islamic financial institutions worldwide operating in more than 75 Muslim and non-Muslim countries.”

Nazrin added that the demand for syariah-compliant financial instruments among religiously-observant households, while the amount of global liquidity being mediated through Islamic finance was also growing.

Citing the Jan 5 issue of The Economist, which acknowledged Malaysia as “the world’s most important Islamic finance centre” and the first-ever issuer of sovereign sukuk in 2002, he said other countries, including non-Muslim ones, have followed in Malaysia’s footsteps.

“Since that time, other countries have started issuing Islamic bonds but Malaysia has remained the market leader. In the first three quarters of 2012, we were responsible for 80% of global sukuk issuances.”

However, he warned that the industry should not rest on its laurels.

“The nature of success is that one has to be constantly on the move, constantly thinking, planning and innovating, and constantly improving against a rising tide of competition.

“Indeed, success is something that is better seen in the rearview mirror just in case it blocks our view of the road ahead.

“We should not forget that although we have made a very strong start, the Islamic financial system is still a work-in-progress.”

Some areas for improvement, he said, included the liquidity of secondary markets and developing longer-term debt maturities so it can be a viable alternative to conventional finance.

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