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Malaysia’s Islamic banks continues to fly high in 2024: Fitch

Malaysia’s Islamic banking market is the third largest globally.

Malaysia’s Islamic banks are expected to outpace the growth of conventional banks in the medium term, reports Fitch Ratings.

Financing by Islamic lenders in the country reached US$190b in 2023, cementing Malaysia’s place as the third largest Islamic banking market globally.

The share of Sharia financing also inched up to 42% of domestic banking system loans in 2023, from 41% as of end-2022, as banks continued to champion as Islamic First strategy, Fitch Ratings noted.

ALSO READ: Malaysia proposes revisions to Islamic banking regulations

“Malaysia will see the entrance of its first Islamic digital bank in H1 2024, which will cater to the country’s underserved banking population. The new entrant is likely to compete aggressively for deposits as it builds its franchise, but we do not expect this to change the industry's competitive dynamics in the near to medium term,” it added.

Overall, the Islamic banking sector's financial performance was said to be relatively steady in 2023, despite the higher rate environment. Fitch expects the trend to be sustained in the near-term on a stable local policy rate and an economy that it forecasts will expand by more than 3% in 2024. 

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