advertisement

ISLAMIC BANKING AND FINANCE: MALAYSIA’S EXPERIENCE AND ACHIEVEMENTS

50 %
50 %
advertisement
Information about ISLAMIC BANKING AND FINANCE: MALAYSIA’S EXPERIENCE AND ACHIEVEMENTS

Published on February 14, 2008

Author: brighteyes

Source: slideshare.net

Description

ISLAMIC BANKING AND FINANCE: MALAYSIA’S EXPERIENCE AND ACHIEVEMENTS 13 June 2006
Victoria University of Wellington
Presented by:
Bakarudin Ishak
Director
Islamic Banking and Takaful Department Bank Negara Malaysia
advertisement

ISLAMIC BANKING AND FINANCE: MALAYSIA’S EXPERIENCE AND ACHIEVEMENTS 13 June 2006 Victoria University of Wellington Presented by: Bakarudin Ishak Director Islamic Banking and Takaful Department Bank Negara Malaysia ISLAMIC BANKING & FINANCE IN MALAYSIA

MALAYSIA AT A GLANCE Population – 26.1 m Muslim – 15.4 m (59%) Strong GDP growth 1 st quarter 2006 5.3% Low inflation

Population – 26.1 m

Muslim – 15.4 m (59%)

Strong GDP growth

1 st quarter 2006 5.3%

Low inflation

In response to the needs of Muslim community Acts as a catalyst to fill the gap to mobilise funds for productive purposes, in particular for Muslim communities Significant untapped business potential Proven to be a viable financial intermediation channel in supporting economic growth Fulfilled the demands of not only the Muslims but non-Muslim population as well WHY ISLAMIC BANKING IS IMPORTANT?

In response to the needs of Muslim community

Acts as a catalyst to fill the gap to mobilise funds for productive purposes, in particular for Muslim communities

Significant untapped business potential

Proven to be a viable financial intermediation channel in supporting economic growth

Fulfilled the demands of not only the Muslims but non-Muslim population as well

Comprehensive Islamic financial system covering all financial sectors operating in parallel with conventional financial system Diversities of players Twelve full-fledged Islamic banking institutions 2 domestic Islamic banks 3 full-fledged foreign owned Islamic banks 7 Islamic banking subsidiaries 9 takaful operators Sound and robust Islamic financial institutions governed by international best practices Rapid growth with wide range of product and services Retail, corporate & investment banking Internationally integrated with international Islamic financial system MALAYSIAN ISLAMIC FINANCIAL SYSTEM

Comprehensive Islamic financial system covering all financial sectors

operating in parallel with conventional financial system

Diversities of players

Twelve full-fledged Islamic banking institutions

2 domestic Islamic banks

3 full-fledged foreign owned Islamic banks

7 Islamic banking subsidiaries

9 takaful operators

Sound and robust Islamic financial institutions governed by international best practices

Rapid growth with wide range of product and services

Retail, corporate & investment banking

Internationally integrated with international Islamic financial system

STAGES OF DEVELOPMENT Gradual and pragmatic .. achieved significant milestones in building comprehensive and integrated Islamic financial system with diversity of players …. Milestones 1969 1983 1993 2003 Pilgrimage Fund Boar d Bank Islam Malaysia Bhd. Bank Muamalat Malaysia Bhd. Foreign Islamic banks Full-fledged Islamic banks Conventional banks offer Islamic window Takaful Operators Syarikat Takaful Malaysia Bhd. Takaful Nasional, Mayban Takaful, Takaful Iklhas, Commerce Takaful Islamic subsidiary Islamic money markets

Dedicated Islamic Banking Division Dedicated minimum capital as Islamic Banking Fund Separate clearing account with the Central Bank Separate cheque clearing system Separate submission of statistical reports in Financial Inst. Statistical System on monthly basis Additional disclosure of Islamic banking portfolio in financial statements CONVENTIONAL BANKS WITH ISLAMIC WINDOW … . t otal segregation of funds to meet Shariah requirement

Dedicated Islamic Banking Division

Dedicated minimum capital as Islamic Banking Fund

Separate clearing account with the Central Bank

Separate cheque clearing system

Separate submission of statistical reports in Financial Inst. Statistical System on monthly basis

Additional disclosure of Islamic banking portfolio in financial statements

Institutional & Regulatory development Product and market development Legal and Shariah framework Enhancement of knowledge and expertise DEVELOPMENTAL FOCUS

ENABLING INFRASTRUCTURE Legal Islamic Banking Act, 1983 Takaful Act, 1984 Government Investment Act, 1983 Legal Redress Framework Shariah Two Shariah governing committees National Shariah Advisory Council at Bank Negara Malaysia Shariah committee at Islamic financial institution Regulatory Adopted international standards

Legal

Islamic Banking Act, 1983

Takaful Act, 1984

Government Investment Act, 1983

Legal Redress Framework

Shariah

Two Shariah governing committees

National Shariah Advisory Council at Bank Negara Malaysia

Shariah committee at Islamic financial institution

Regulatory

Adopted international standards

ROLE OF BANK NEGARA MALAYSIA BNM Conventional financial system Islamic banks Takaful operators Non-banking institutions Money market Capital market Customer Islamic financial system Conventional banks Insurance companies Non-banking institutions Money market Capital market Malaysia Deposit Insurance Corporation Dispute resolution Judicial system KL Regional Arbitration Centre Financial Mediation Bureau Supervisory objective Financial stability Consumer protection Separate clearing and settlement system Liquidity management Specific monetary policy instruments Islamic Banking Act 1983 Takaful Act BAFIA 1989 Insurance Act 1996

Dispute resolution

Judicial system

KL Regional Arbitration Centre

Financial Mediation Bureau

Supervisory objective

Financial stability

Consumer protection

Separate clearing and settlement system

Liquidity management

Specific monetary policy instruments

COMPREHENSIVE ISLAMIC FINANCIAL SYSTEM Legal, Shariah & Reg Institutional development Product & market Knowledge and education Comprehensive legislation Dispute resolution Dedicated high court Arbitration centre Financial Mediation Bureau Tax neutrality policy Shariah Advisory Council and its governance International best practices - IFSB Comprehensive product range in banking, takaful & financial markets Global sukuk - sovereign & multilateral institutions Consumer Education & Awareness Programmes Complete training infrastructure INCEIF, IBFIM & ICLIF International conferences Domestic & foreign Islamic banks, Islamic banking windows Islamic capital market players Fund for Shariah Scholars Promote Shariah dialogues Scholarship Research grant Offshore players Liberalised equity policy for Islamic subsidiaries and takaful

Comprehensive legislation

Dispute resolution

Dedicated high court

Arbitration centre

Financial Mediation Bureau

Tax neutrality policy

Shariah Advisory Council and its governance

International best practices - IFSB

Comprehensive product range in banking, takaful & financial markets

Global sukuk - sovereign & multilateral institutions

Consumer Education & Awareness Programmes

Complete training infrastructure

INCEIF, IBFIM & ICLIF

International conferences

Domestic & foreign Islamic banks, Islamic banking windows

Islamic capital market players

Fund for Shariah Scholars

Promote Shariah dialogues

Scholarship

Research grant

Offshore players

Liberalised equity policy for Islamic subsidiaries and takaful

VISION TO BECOME ISLAMIC FINANCIAL HUB Sustaining Malaysia’s competitive edge as leading IFC following:- progressive development achievements of domestic mkt integration & liberalisation Moving forward, hub envisioned in Financial Sector Master Plan Growing interest from Middle East investors now seen Opportunity t o improve trade & investment ties , a nd linkages between Malaysia & other parts of the world

VISION TO BECOME ISLAMIC FINANCIAL HUB

Sustaining Malaysia’s competitive edge as leading IFC following:-

progressive development

achievements of domestic mkt

integration & liberalisation

Moving forward, hub envisioned in Financial Sector Master Plan

Growing interest from Middle East investors now seen

Opportunity t o improve trade & investment ties , a nd linkages between Malaysia & other parts of the world

LEADING INITIATIVES IN ISLAMIC FINANCE … for global integration 2005 Islamic Financial Services Board Malaysia global sukuk 2002 2003 2004 Islamic securities/ Sukuks by multilateral dev’t banks Malaysia-IDB MoU Shariah scholars dialogue Financial liberalisation Financial Market Islamic Index Foreign Islamic FIs, 49% foreign equity in Islamic banks and takaful companies Forex liberalisation Promotion of trade, investment, takaful, financial market & ICT International Islamic standard-setting body Attract international investors First global sovereign sukuk Greater Shariah harmonisation Financial Sector Master Plan Malaysia as international hub/ Labuan’s niche in Islamic finance

Meeting the education needs of all levels of Islamic finance practitioners Level of knowledge: Elementary Focus: Short training courses to meet industry’s needs IBFIM INCEIF ICLIF Level of knowledge: Intermediate & advanced Focus: International professional certification and post-graduate programs Focus: Leadership programs Institutions of higher learning Other training providers Human Capital Development in Islamic Finance

CIFP PROGRAMME MODULES Part 1 (Building Knowledge) Part 2 (Building Skills) Part 3 (Actual Work) Islamic Economics and Finance Theory & Ethics Islamic Financial Institutions and Markets Islamic Finance Regulations and Governance Applied Shariah in Financial Transactions Deposits Mobilization and Financing Management Wealth Planning and Management ASSOCIATE MEMBER Common Modules Structuring Financing Requirements Issuing & Managing Islamic Securities Shariah Audits and Compliance Customer Relationship Management Issues in Islamic Financial Institutions & Markets Specialized (Banking) Modules Deposit & Financing Practices of Islamic banks Managing Islamic Banks Treasury and Risk Management for Islamic Banks Legal aspects of Deposits & Financing Specialized (Takaful) Modules Managing Takaful Institutions Risk Management in Takaful Operational Aspects of Takaful Actuarial Concepts & Practices PROFICIENT MEMBER Articleship PRACTISING MEMBER Pedagogical approach: Self-study (on-site and online learning), exams, case studies, simulation Hands-on activities & role play

Islamic Economics and Finance

Theory & Ethics

Islamic Financial Institutions and Markets

Islamic Finance Regulations and Governance

Applied Shariah in Financial Transactions

Deposits Mobilization and Financing Management

Wealth Planning and Management

ASSOCIATE MEMBER

Common Modules

Structuring Financing Requirements

Issuing & Managing Islamic Securities

Shariah Audits and Compliance

Customer Relationship Management

Issues in Islamic Financial Institutions & Markets

Specialized (Banking) Modules

Deposit & Financing Practices of Islamic banks

Managing Islamic Banks

Treasury and Risk Management for Islamic Banks

Legal aspects of Deposits & Financing

Specialized (Takaful) Modules

Managing Takaful Institutions

Risk Management in Takaful

Operational Aspects of Takaful

Actuarial Concepts & Practices

PROFICIENT MEMBER

“… Islamic banking and finance will emerge as a force to be reckoned with in shaping the future development of global finance …”

INTERNATIONAL DEVELOPMENT IN ISLAMIC FINANCE Presently… Rapid growth of Islamic banking in the global financial world Various parts of the world are actively promoting Islamic banking and finance in their respective jurisdictions Emergence of global conventional players venturing into Islamic financial activities

Presently…

Rapid growth of Islamic banking in the global financial world

Various parts of the world are actively promoting Islamic banking and finance in their respective jurisdictions

Emergence of global conventional players venturing into Islamic financial activities

COMPREHENSIVE ISLAMIC FINANCIAL SYSTEM ISLAMIC BANKING & FINANCE IN MALAYSIA

Conventional banks Islamic banks Conventional financial system Islamic financial system Conventional banks window MALAYSIA’S PARALLEL DUAL FINANCIAL SYSTEM Conventional banks Islamic Banking Subsidiaries Insurance Companies Takaful Operators ISLAMIC BANKING & FINANCE IN MALAYSIA

GROWTH OF ISLAMIC BANKING AND FINANCE Market share of Islamic banking sector (as at March 2006) Assets : 11.6% or RM113.5 b Deposits : 11.6% or RM85.0 b Financing : 15.7% or RM67.5 b Growing at 19% p.a. since 2000 Market share of takaful sector (as at March 2006) Assets : 5.9% or RM6.2 b Market : 5.9% penetration Performance of Islamic financial markets (as at March 2006) Active money market activities : monthly trading & investment turnover of RM21 billion Wide range capital market investment avenue: Islamic PDS 40% of outstanding PDS Over 80% Shariah approved counters on Bursa Over 70 Islamic unit trusts Issuance of first Islamic residential mortgage backed securities of RM2.05 billion based on musyarakah concept by Cagamas MBS Berhad RM400 million BNM Ijarah Sukuk issued in February 2006 Islamic Banking Assets 5.9% Assets of Takaful funds (as at Mar-2006)

Market share of Islamic banking sector (as at March 2006)

Assets : 11.6% or RM113.5 b

Deposits : 11.6% or RM85.0 b

Financing : 15.7% or RM67.5 b

Growing at 19% p.a. since 2000

Market share of takaful sector (as at March 2006)

Assets : 5.9% or RM6.2 b

Market : 5.9%

penetration

Performance of Islamic financial markets (as at March 2006)

Active money market activities :

monthly trading & investment turnover of RM21 billion

Wide range capital market investment avenue:

Islamic PDS 40% of outstanding PDS

Over 80% Shariah approved counters on Bursa

Over 70 Islamic unit trusts

Issuance of first Islamic residential mortgage backed securities of RM2.05 billion based on musyarakah concept by Cagamas MBS Berhad

RM400 million BNM Ijarah Sukuk issued in February 2006

THANK YOU

CHARACTERISTICS OF ISLAMIC BANKING Islamic financial transactions based on Shariah principles: Contract (aqad) No elements of usury (riba) No elements of uncertainty (gharar) and gambling (maisir) Multi-faceted roles based on nature of financial transactions engagement: ISLAMIC FINANCIAL CONTRACTS Savings and Current Accounts Investment Account Asset Creation ISLAMIC BANKING & FINANCE IN MALAYSIA

Islamic financial transactions based on Shariah principles:

Contract (aqad)

No elements of usury (riba)

No elements of uncertainty (gharar) and gambling (maisir)

Multi-faceted roles based on nature of financial transactions engagement:

ISLAMIC FINANCIAL CONTRACTS

Savings and Current Accounts

Investment Account

Asset Creation

DEPOSITORS/ INVESTORS BANK PROFIT FINANCING AND INVESTMENT ACTIVITIES LOSS 30% 70% 100% INVESTMENT ACCOUNTS INVEST FUNDS (MUDHARABAH) Pre-agreed Profit- Sharing Ratio ISLAMIC BANKING & FINANCE IN MALAYSIA

Ijarah Istisna Bai’ al salam Musyarakah Mudharabah Bai’ bithaman ajil Murabahah EXAMPLES OF ISLAMIC CONTRACTS Lease Commission to manufacture (progressive payment) (price is paid in advance, goods delivered in the future) Islamic forward sale Partnership financing Profit Sharing contract D eferred payment sale Cost –plus or mark-up

Sources of funds Non-mudharabah deposits Mudharabah deposits SHF Application of funds General pool Specific account I Specific account II Profit    Distribution of profit Depositors Bank Depositors or ISLAMIC BANKING & FINANCE IN MALAYSIA ISLAMIC BANKING OPERATIONS

Owners’ Equity Investment risk reserve Profit equalization reserve Profit sharing investment accounts Equity of Profit Sharing Investment Accounts (PSIA) Other liabilities Current accounts LIABILITIES STYLIZED BALANCE SHEET OF AN IIFS Fixed assets Other assets Inventories Equity investment in capital ventures Equity investment in joint ventures Investment in real estate Investment in leased assets Investment in securities Sales receivables Cash & cash equivalents ASSETS

TAKAFUL (e.g. Family, General) TABARRU’ (Donation) PROFIT SHARING ON SURPLUS A contract among participants to reciprocally help each other against defined loss Commercial profit sharing contract between participants and takaful operator Agreement to relinquish certain portion of contribution as donation to fulfil obligation of mutual help and joint guarantee Concepts Based on……. Takaful

Surplus/ (Deficit) Participants’ Risk Account (PRA) Participants’ Account (PA) Investment Profit Takaful Operators Less Less Operating Expenses Retakaful Reserves Claims Participants Contributions 100%-x% Surplus on Maturity x% x% ISLAMIC BANKING & FINANCE IN MALAYSIA Wakalah fees x% x% 100% -x% 2 Models: Mudharabah or Wakalah Takaful Model

Retakaful

Reserves

Claims

Add a comment

Related pages

islamic banking and finance - malaysia's experience and ...

islamic banking and finance - malaysia's experience and achievement - download at 4shared. islamic banking and finance - malaysia's experience and ...
Read more

Islamic Banking and finance:Malaysia's Experience and ...

首页 > Islamic Banking and finance:Malaysia's Experience and Achievements. Islamic Banking and finance:Malaysia's Experience and Achievements.
Read more

Islamic banking and finance - Wikipedia, the free encyclopedia

School of Islamic Islamic Banking and Finance, ... Centre for Islamic banking and Finance Training, Kuala Lumpur (Malaysia) Institute of Islamic Finance, ...
Read more

Islamic Banking and Economic Growth: Empirical Evidence ...

centre for Islamic banking and finance. ... and Economic Growth: Empirical Evidence ... Malaysia‘s international trade and Islamic bank ...
Read more

www.islamic-finance.com

Information on Islamic investment and Islamic banking, research resources, books, editorials, international events, ... Islamic Finance (3 vols.)
Read more

Banking on the ummah - The Economist - World News ...

Islamic finance Banking on the ummah ... Malaysia’s Muslim ... The second institution is the Islamic Banking and Finance Institute of ...
Read more

Islamic Financial System: The Malaysian Experience and the ...

ISLAMIC FINANCIAL SYSTEM: THE MALAYSIAN EXPERIENCE ... the rapid development in Islamic Banking and Financial ... Islamic Financial System: Malaysia‟s ...
Read more