Local Islamic Banks Need To Innovate More

Local Islamic banks need to innovate more to remain competitive within the industry following the government’s move to liberalise the financial services sector.

“I think it is a question of survival for competitors. Local players need to buck up and innovative more to effectively compete.

“With foreign banks stating an interest in moving to Malaysia, it is essential that they do this to move ahead,,” said Bank Islam Malaysia Bhd Managing Director, Datuk Seri Zukri Samat Monday.

He told Bernama this after the signing ceremony of Bank Islam’s closed RM330 million syndicated facility for Kedah Sato Sdn Bhd’s new Kolej Universiti Insaniah (KUIN) campus in Baling.

He said in promoting Malaysia to become a leading international and regional hub of Islamic finance, the country needs more industry players.

“My view is that, the interest of the foreign parties, will basically strengthen our position as an Islamic financial hub. When they come in, they will bring along more products and even capital.

“Personally, I welcome them,” he added.

Recently, it was reported that the National Bank of Abu Dhabi – one of biggest in the United Arab Emirates – plans to start commercial banking operations in Malaysia under the liberalisation plan.

Meanwhile, Bahrain-based Islamic lender, Al Baraka is in talks to buy a stake in Malaysia’s Bank Muamalat.

“I think the cake is still big enough for everyone to share. But I will not say, local players would not be affected by the liberalisation move. Some will be.

“However, there are niche areas, where local players need to position themselves and perform,” he explained.

He said the Islamic finance industry in Malaysia is growing faster than conventional banking, with a 20 per cent growth annually.

Asked if there would be any joint-ventures with foreign parties, he said: “If they are already here, I don’t think we need to have any form of cooperation.

“Of course, they have to be members of the Association of Islamic Banking.

“On that platform, we will cooperate with one other. But I don’t think, there is a specific strategy to collaborate with these banks,” he explained.

Zukri also said, he is confident the Islamic finance industry will show a positive trend this year.

Islamic Banking Can Boost Trade Between China, Muslim States

China has been urged to consider introducing Islamic banking practices to boost trade with the Arab and Muslim world.

China is already the area’s biggest commercial partner but economists and experts in the industry say this can be greatly increased.

“Most of the money in Islamic banking comes from Gulf countries and these oil-rich countries prefer Islamic banking tools, so for China to invest in this regard, there is big potential for growth and business,” said Wajdi Makhamreh, CEO of the Amman-based Noor Investments brokerage.

“There is a dire need for networking between Chinese banks and their counterparts in Arab and Muslim banks to cooperate in introducing Islamic banking tools,” Makhamreh told Xinhua.

Faeq Hjazin, economist and expert in the Islamic banking sector, said: “If Chinese banks and investors consider introducing Islamic banking tools, they will help boost their country’s commercial exchange with the Arab and Muslim world at a faster pace.”

The experts said China could play a larger role in the region and increase its involvement in mega projects in the Arab and Muslim world once it started providing Islamic banking products.

Fouad M. Alaeddin, Middle East Managing Partner and Head of Markets at Pricewaterhousecoopers, said the potential for growth in the sector was huge.

The experts said the return on investment in the Islamic banking sector was sustainable and lucrative as the sector was less risky than conventional banking.

“Islamic banks rely on genuine collaterals. They do not rely on debt, and they do not deal with hedge funds and derivatives and other toxic financial instruments that caused the global financial crisis,” Makhamreh said.

“This is the reason they were the least to be affected,” he said.

Hjazin said China would benefit from thinking about Islamic banking styles as these were preferred by over one billion Muslims across the world.

source : china gate