ISLAMIC BANKING | Cesar Tordesillas, Malaysia

Malaysia still tops Islamic finance sector

Malaysia still leads in Islamic finance trailed by Singapore, which is striving to create more business in the sector.


HSBC Amanah CEO and Global Markets Amanah managing director Rafe Haneef said Malaysia had a large volume of Islamic investors looking for syariah-compliant investments like sukuk compared with the Singapore market.

“Along with Islamic investors, Malaysia has a large number of Muslim-owned companies, most of which are looking for syariah-compliant financing and sukuk issuance. Again, there is not a high demand for such financing in the Singapore corporate environment,” Rafe said.

Malaysia accounts for 60 percent of global sukuk deals.

Rafe said the global sukuk market was expected to expand to US$44 billion this year. For the first half of 2012, the global sukuk market was worth $20.5 billion, up from $15 billion a year earlier.

Bankers noted that Singapore was hobbled by a lack of domestic market for Islamic finance products, while Middle East investors were still US dollar-based and conservative.

The situation appeared to be improving when in 2010 Khazanah sold S$1.5 billion or $1.2 billion sukuk in Singapore, and Sabana, the world’s largest syariah-compliant real estate investment trust, raised S$664 million or $530 million through its initial public offering.

The business daily said another problem for Singapore was that conservative Middle Eastern investors tended to invest only in familiar companies and preferred to make those investments in US dollars.

Maybank Singapore’s head of Islamic banking Mohd Ismail Hussein said the expected demand from Middle East investors did not materialise because of economic and liquidity issues at home.

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