Islamic capital market has potential to expand


“In 2020, the country’s capital market registered an overall growth of 7% compared with 3% in 2019. This is largely due to the ICM segment, which increased by 11%, compared to 8% the previous year,” said SC executive chairman Datuk Syed Zaid Albar in his speech at the Islamic Capital Market Summit 2021: Connecting Islamic Capital Market To Shape a Sustainable Future.

KUALA LUMPUR: Malaysia continues to lead in the area of the Islamic capital market (ICM) segment of the economy and the country’s capital market has been resilient overall despite the ongoing Covid-19 pandemic.

Malaysia’s ICM has seen a stronger growth level in 2020 compared to 2019, said the Securities Commission (SC).

“In 2020, the country’s capital market registered an overall growth of 7% compared with 3% in 2019.

“This is largely due to the ICM segment, which increased by 11%, compared to 8% the previous year,” said SC executive chairman Datuk Syed Zaid Albar in his speech at the Islamic Capital Market Summit 2021: Connecting Islamic Capital Market To Shape a Sustainable Future.

“Malaysia continues to lead the sukuk market, accounting for approximately 45% of total global sukuk outstanding.

“As for Islamic funds, Malaysia remains one of the top three jurisdictions, accounting for over 29% of total global assets under management,” he added.

Syed Zaid said the stronger performance of the ICM is a sign of optimism, more so especially when the world is now on an economic recovery path despite the continued uncertainties.

He added that there was still tremendous potential for the ICM, namely, in the area of expanding its reach to the broader stakeholder economy through sustainable initiatives.

“Along with growing interest to invest responsibly, efforts will be made to enhance investor access to syariah-compliant companies with good environmental, social, and governance (ESG) practices,” he said.

“This will encourage companies to consider all of their relevant stakeholders, including impact to the society and environment in their business decision, which will further elevate the socially responsible and ethical values of syariah-compliant companies,” Syed Zaid added.

He noted that guidance is essential to incorporate syariah requirements and ESG standards for investors seeking such investments, as well as companies aspiring to adopt ESG practices.

“This guidance will leverage on the SC’s syariah screening and internationally-recognised screening methodologies.

“The SC will look into expanding the use of the ICM framework as a reference point, and its products and services as funding sources for further development of the Islamic social finance sector,” he said.

On a related matter, Syed Zaid said that the increased focus by the financial sector on climate change is expected to reshape the fundamentals of finance.

This is because climate risk is increasingly becoming intertwined with investment risk and returns.

“The recent Conference of the Parties 26 (COP26) in Glasgow was seen as a watershed moment for a sustainable future.

“Financial regulators around the world, including Malaysia, have also launched various initiatives to facilitate development policies to catalyse growth in this space,” he said.

“It centres on standards of disclosures as well as guidelines for investment products and taxonomies,” Syed Zaid added.

He also noted that the accelerated adoption of technological innovations will have a significant impact to economic recovery moving forward.

“The advent of technology is transforming how issuers undertake fundraising activities, redefining intermediation, shaping new investor behaviour and revamping clearing and settlement infrastructures – making the ecosystem more dynamic than ever before,” he said.

“The increased use of technology is promoting more innovation and efficiency by providing investors with easier and better access to financial products and services,” he added.

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