THERE was ample liquidity in the Islamic banking system last year, with total deposits growing moderately by 21% to RM72.9bil as at the end of last year.
Bank Negara said the IBS (Islamic Banking Scheme) commercial banks and Islamic banks accounted for the major chunk of 83% of total deposits in the sector (2003: 73%).
The Islamic interbank market also registered a major growth of 65% in terms of turnover volumes against the backdrop of ample liquidity.
The mudharabah interbank investment transactions continued to dominate, with more than a 70% market share of the total turnover volumes in the Islamic interbank market.
The central bank said stable rate of return on the mudharabah interbank investment, coupled with the enlarged issuance of government and central bank securities, had contributed to strengthening the Islamic interbank market's position to meet increasing demand for short-term investments.
The excess liquidity was absorbed via the issuance of RM5.1bil worth of the Government and Bank Negara Islamic papers.
It said trading volume in the mudharabah interbank investment transactions continued to record favourable growth of 71%, at an average monthly turnover of RM40bil.
Bank Negara said the Islamic bond market charted a positive growth of 13% or RM11.6bil in 2004. Total outstanding Islamic securities amounted to RM97.8bil, accounting for 26% of the total outstanding bonds in the capital market.
In the private debt securities market, a total of RM82.7bil Islamic securities remained outstanding as at end-2004, which accounted for 42% of the total outstanding private debt securities in the market or a rise of 8.5% from 2003.
The continued low interest rate environment and ample liquidity situation influenced corporations to raise funds in the capital market via the issuance of long-term private debt securities, it said.
It noted that a major development in the domestic Islamic bond market was the inaugural issuance of ringgit-denominated Islamic debt securities based on bai bithaman ajil (BBA) by a multilateral financial institution.
In the mortgage securities segment, Cagamas Bhd introduced a new Islamic mortgage securities based on the concept of BBA in addition to the existing mudharabah Cagamas bond.
Did you find this article insightful?