Islamic banks' market share grows in Malaysia

Malaysia's Islamic banks gained a slightly larger share of total assets in the banking system in the first seven months of 2012, said the government in an annual economic report published on Friday.

Islamic banks accounted for 24.2 percent or 69.5 billion ringgit of the country's total banking assets as at end-July, up from 23.7 percent at the end of last year.

Total assets grew at a faster rate of 20.6 percent between January to July, compared to 15.4 percent in the same period last year.

The Islamic banks' deposits amounted to 362.7 billion ringgit at the end of July, increasing the share of total deposits to 26.1 percent from 25.8 percent at the end of last year.

Islamic financing accounted for 26.6 percent of total loans at the end of July, compared with 25.9 percent at the end of last year.

The household sector accounted for over two-thirds of loans made through Islamic financing.

Islamic financing is expected to account for 40 percent of total financing by 2020 due to greater participation and more diverse offerings, under the financial sector blueprint prepared by the central bank.

The Islamic capital market, consisting of equities compliant to sharia or Islamic law, improved its share of total trade volume to 66.8 percent from 59.1 percent last year.

"This market has contributed significantly to the development of the overall capital market, it remains an important alternative source for the raising of capital," said the report.

The share of sharia-compliant equities was unchanged at end-July, accounting for 65 percent, or 931 billion ringgit, of the total market capitalization.

Malaysia retained its pole position in the issuance of Islamic bonds, or sukuk, with a 71 percent share of global issuances, and it accounted for 68 percent of sukuk outstanding globally as at end-July.

The takaful industry increased its assets to 18.3 billion ringgit, or 9 percent of total insurance assets in the seven months, with nearly 80 percent concentrated in fixed income and government securities.

(Reuters / 28 Sep 2012)

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Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com