Malaysia is center of reference for Islamic Banking
PIONEER: Syariah-compliant system serves as model for other countries, says Najib.
THE government has succeeded in developing the Islamic financial system, as the country has become the centre of reference for others around the world, said Prime Minister Datuk Seri Najib Razak.
He said Malaysia was not only known for pioneering the Islamic banking and financial system, but also as the only nation that had developed such a system through a holistic approach.
Najib said the nation's Islamic financial system offered syariah-compliant products and fulfilled the community's needs, as the nation had developed an infrastructure for the system to run well.
"Alhamdulillah (praise to God), the government's initiatives have been fruitful, as the country is now an international referral centre for a syariah-compliant Islamic financial system," he said at the launch of the week-long Malaysian Unit Trust Week 2014, themed "PNB 360 Investment", at the Rural Transformation Centre in Tunjong here yesterday. More than 5,000 people attended the event.
Najib said Malaysia continued to be a global leader in the international sukuk market, accounting for more than US$82.4 billion (RM266 billion), or 68.8 per cent, of the total international sukuk issuances last year.
"Islamic bank assets showed a growth of up to 16.5 per cent, with a market share of 25.7 per cent, of the total banking system assets last year," he said, adding that total transactions involving foreign exchanges managed by international Islamic banks had increased to RM18.1 billion last year, compared with RM14.6 billion in 2012.
He said the figures showed that syariah-compliant Islamic financial transactions had gained a foothold not only in Malaysia, but also at the international level.
Najib, who is also finance minister, said the government, through Bank Negara, had allocated RM500 million to establish a special university to nurture quality talent, with the aim of expanding the Islamic banking and financial industry.
He said another RM200 million had been channeled to set up an international-standard syariah research centre to ensure all components of Islamic finances strictly complied with syariah principles.
"The government's seriousness in empowering and raising the standards of the Islamic financial system can been seen from various governing and legal initiatives."
Under the legislation, he said, syariah was placed high up in the Islamic Financial Service Act 2013, whereby any financial institution found to have breached syariah principles in its business transactions faces a jail term of up to eight years, fine of up to RM25 million, or both, upon conviction.
Najib said the implementation of the initiatives to develop the system was among the key factors that caused the nation to receive the world's attention.
"What we envision is an Islamic financial system that is truly respectable, not only in its label and logo, but also for fulfilling the true essence of Islam."
He said in the latest development, the World Bank had indicated its interest to open a branch office in the country, with one of its main objectives being to gain experience and learn from Malaysia to develop the Islamic financial system.
"This is another endorsement for the country, which is a model, driver and pioneer in the agenda to raise the standards of the financial system, based on syariah, on the international stage."
Najib said Permodalan Nasional Bhd's (PNB) role in empowering the Bumiputera economy could not be denied, as it successfully managed investors' funds from the public, especially the lower-income group.
He said 75 per cent of Bumiputeras were living below the poverty line at the beginning of Malaysia's independence and held only two per cent in equity in the 1970s.
"The formation of PNB as an important New Economic Policy instrument has helped the national affirmative policy to restructure society through Bumiputera-share ownership in the corporate sector.
"This has provided an opportunity to Bumiputera professionals to contribute directly to the country's wealth creation and management.
"After 36 years, more than RM267 billion in the people's funds was managed excellently by PNB, through trust funds such as Amanah Saham Nasional, Amanah Saham Bumiputera, Amanah Saham Malaysia, AS1Malaysia and proprietary funds."
Najib said this had led the way for Bumiputeras to venture into strategic sectors, which they had never dreamed of doing.
"This innovation, allowing the rakyat to be shareholders with as low as RM10, has made PNB the most successful public institution, becoming a model to the world.
"This proves the government's commitment to realising the spirit of 'Maqasid al-Syariah' in the context of wealth management, fulfilling the principles underlined by Allah SWT."
He lauded PNB's initiative to expand the syariah-compliant portfolio.
He said one of PNB's most important portfolios, Maybank, had shown tremendous Islamic banking asset growth through Maybank Islamik, which expanded from RM3.6 billion to RM127 billion in assets.
"Maybank operates as the third-largest Islamic commercial bank in the world in terms of assets and is the largest in Southeast Asia."