Malaysia

Islamic Finance Industry: Alpha & Omega The enactment of the Islamic Banking Act in 1983 spawned a new paradigm of banking in Malaysia. The establishment of the first Islamic bank (namely Bank Islam Malaysia) in 1983 and subsequently Takaful Malaysia in 1984 provided an alternative means for Shariah compliant fund placements and management. Since its inception, the industry has gained staggering momentum and Malaysia is currently regarded as a leading contributor in the Islamic finance industry. This development has mainly been driven by the government’s efforts in promoting the industry and providing incentives to boost growth. The Islamic finance industry has various components but the most notable is Takaful, which makes Islamic finance unique. Currently there are 12 Takaful operators in Malaysia (with four new licenses issued since 2009) and 4 re-Takaful operators. Bank Negara Malaysia (BNM) indicates the Takaful industry has been growing rapidly, appealing to both Muslims and non-Muslims. The industry is expected to grow by 15-20 percent annually, with contributions expected to reach USD7.4 billion by 2015.1 Speaking in Kuala Lumpur in April 2011, the former deputy governor of BNM, the late Datuk Mohd Razif bin Abd Kadir, indicated the Takaful industry had a compound average growth rate of 27 percent in terms of net contributions between 2005–2010, with family Takaful driving growth at 28 percent for the same period and dominating more than 80 percent of the total Takaful market in 2010.2 Takaful & Re-Takaful: The Basis of Shariah Compliant Insurance The prevailing needs of the Muslim community looking for a Shariah compliant alternative to conventional insurance accelerated the development of the Takaful industry in Malaysia. This, in addition to the uprising of the Islamic banking sector, boosted the Takaful industry to its present more refined and matured form. In 1982, the Malaysian government set up a task force to study the feasibility of creating an Islamic insurance company. The move was triggered by the Malaysian National Fatwa Committee’s decree, which ruled the current form of life insurance a void contract due to the presence of the elements of Gharar (uncertainty), Riba’ (usury) and Maisir (gambling).3 This was further strengthened by the introduction of the Takaful Act enacted in 1984 and the incorporation of the first Takaful operator in Malaysia in November of the same year. Takaful is a form of Shariah compliant insurance. The word originates from Arabic and is defined as ‘joint guarantee’. A Takaful fund is a fund in which participants contribute a sum of money to be used to assist participants against a defined loss or damage. The operator entrusted to manage these funds on behalf of the participants usually earns a fee known as the agency or Wakalah fee. However, depending on the variations of the Takaful fund’s operations, some operators may also earn profit from the investment of its shareholders' funds, or receive a share of the investment profit or any surplus of the Takaful funds based on an agreed contract.3 In all instances, the operator is usually indemnified of any loses that the investment may incur. The Takaful industry is broadly divided into family Takaful business (Islamic "life" insurance) and general Takaful business (Islamic general insurance). In Malaysia, Takaful operators have flexibility in choosing either the Mudharabah (profit-sharing) or Wakalah (agency) operational models in compliance with Shariah principles and prudential requirements. The Mudharabah model, more commonly used in Malaysia and the Asia Pacific region, provides an incentive for the operator to perform careful underwriting, to manage claims judiciously and to limit selling expenses so as to increase its return on management/shareholder capital and efforts. The Wakalah model, used in the Middle East, is seen to be relatively more transparent since fees are clearly related to an operator’s operational costs.

Public Bank's share price fell to almost a year low in late September, closing 16 sen lower at RM12.04, according to Bernama.

Bank Rakyat expects its profit before tax and zakat to reach RM2 billion for its current financial year ending Dec 31, 2011.

Maybank expects its community financial services revenue to grow to RM12 billion in 2015, from the current RM6 billion, due partly to increases in businesses derived from its transformed branches.

AmBank Group and ANZ have signed an MoU to introduce ANZ's Signature Priority Banking service to AmBank and AmIslamic Bank's affluent retail banking customers.

Yinson Holdings has signed agreements with UOB Group and Oversea-Chinese Banking Corp Ltd for a US$105 million or RM334.2 million loan.

Bank Islam Malaysia Bhd expects to attract 100,000 depositors and deposits of RM50 million within the first year of the launch of Al-Awfar Junior Savings Account-i for young customers.

The slump in performance of key economies around the world seen to drag down lender’s profits.

The alliance seen to step up trade and investment between India and South East Asia.

The lender wants to the M&A that has a strategic fit, which it didn’t see in the last two failed attempts.

Bank Rakyat launched a credit card balance transfer campaign which allows over 200,000 holders of its credit cards to enjoy an annual profit rate of nine percent and a three percent cash rebate.

The lender and its local rivals are currently searching for good SMEs with export potentials.

Maybank Bhd will open at least six branches in Sabah as part of the commitment of the nation's biggest commercial bank to stimulate the economy, says executive vice-president Mohd Hanif Suadi.

Uppal previously worked in StanChart as the CFO in its Taiwan, the Philippines and the UAE offices.

Malayan Banking Bhd (Maybank) has applied for a banking license in Laos, said President & Chief Executive Officer Datuk Seri Abdul Wahid Omar.

Bank Simpanan Nasional is eyeing 300,000 users to its Internet banking by end of 2011, with about RM6 million transactions to be done online.