KUALA LUMPUR: After two failed merger attempts with Islamic banks, MALAYSIA BUILDING SOCIETY BHD is opting to transform into a syariah lender by itself.
MBSB has stopped offering conventional loans and sees more room for growth in Islamic services, chief executive officer Ahmad Zaini Othman said in an interview on Monday. The mortgage provider and consumer lender, whose net income plunged 75% last year, ended discussions with Bank Muamalat Bhd in February after a proposal to combine with CIMB GROUP HOLDINGS BHD and RHB Capital Bhd was called off in January 2015.
“MBSB’s plan is not surprising as many see Islamic finance as the way forward,” said Badlisyah Abdul Ghani, president of the Chartered Institute of Islamic Finance Professionals in Kuala Lumpur and the former CEO of CIMB Islamic Bank Bhd. “People are not only wanting banks to provide Islamic products but are demanding them.”
Malaysia, which pioneered syariah finance in the 1980s, aims to have 40% of its banking assets complying with the religion’s ban on interest by 2020 from 26.8% at the end of last year. A global Islamic population that’s expanding faster than non-Muslims is driving growth in syariah-compliant finance, with Ernst & Young LLP predicting the industry’s worldwide assets will double to US$3.4 trillion by 2018 from 2013.
Around 85% of MBSB’s outstanding loans were already syariah-compliant and credit growth this year should be 6% to 8%, in line with the industry, Ahmad Zaini said. The company wasn’t looking at any other mergers and will maintain its focus on government contracts, particularly in the development of affordable housing, he said. – Bloomberg
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