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Investment banks (IBs) want Bank Negara Malaysia to withdraw the property lending guideline, which was introduced in 1997. It stipulates that a bank’s credit facilities should not exceed 20% of its total outstanding loan base. Compliance with this requirement is calculated on a quarterly basis. For IBs, the guideline mainly affects their underwriting business. They think the guideline is outdated, especially since there are already other macroprudential measures introduced by Bank Negara in recent years. The Malaysian Investment Banking Association (MIBA) had highlighted the issues affecting the industry to Bank Negara. It is understood that the central bank is currently reviewing the guideline.

#Malaysian Danajamin Nasional has issued its inaugural RM500 million, tier-2 subordinated sukuk. It is part of a RM2 billion of senior and subordinated Sukuk Murabahah facility. The subordinated sukuk has a tenure of 10 years and is rated AA1 by RAM Rating Services and AA+ by the Malaysian Rating Corporation. The inaugural issue was oversubscribed, receiving a response of about RM800 million from a diverse range of investors. Danajamin CEO Mohamed Nazri Omar said that a total of 16 investors participated in the inaugural issuance and the sukuk achieved a yield of 4.80%. The issuance also sees Danajamin strengthening its regulatory capital level, enabling it to continue meeting its developmental mandate to stimulate the sukuk market.

In #Malaysia the Securities Commission (SC) and The International Shari’ah Research Academy for Islamic Finance (ISRA) have released a joint publication on "Sukuk: Principles & Practices". The textbook was launched by His Royal Highness Sultan Nazrin Muizzuddin Shah. The new textbook focuses on the theories and practices governing sukuk across various jurisdictions while adopting a global perspective. Is serves as a source of reference to academicians, students and practitioners to gain greater understanding on sukuk. Recently, Malaysia witnessed the issuance of the world’s first green sukuk under SC’s Sustainable & Responsible Investment (SRI) Sukuk framework. This affirmed the country’s position as a leading Islamic finance marketplace and centre for sustainable finance.

Insurance technology or insurtech strives to innovate the insurance business of risk management. As a subset of fintech, insurtech uses big data to form a precise risk profile of the subject that is being covered. According to Maybank Ageas CEO Kamaludin Ahmad, one example is the telematics system in vehicle-monitoring. He said the intended market would include logistics companies, delivery companies and even small-medium enterprises with only three to five vehicles. Kamaludin believes insurtech can be sold and will be beneficial to people. However, it requires a change of mindset. Maybank Ageas and its household brand Etiqa Takaful are dominating the market share, capturing over half the total insurance and takaful market. Some argue that the size of the Maybank-Etiqa insurance is too big, to the extent of being deemed a monopoly. Kamaludin thinks Maybank is far from monopolising anything, the focus is not on pushing sales, but on being the best in the sector.

Sukuk investing in environmentally sustainable projects has become increasingly popular in the recent past. In the latest development, Malaysia saw its first green sukuk in July, when solar power firm Tadau Energy came out with a green sukuk with a tenure of 16 years, raising 250mn ringgit ($59.2mn). Malaysia’s Securities Commission came up with a Sustainable Responsible Investment Sukuk Framework as early as in 2014. This regulation clarified that proceeds of such sukuk should be used to preserve the environment, conserve the use of energy and promote renewable technologies. The World Bank lauded Malaysia for its innovative approach. Another initiative emerged in the Gulf Cooperation Council. The Green Sukuk and Working Party was set up as a collaboration of experts in project development, environmental standards, capital markets, and Islamic finance. Founders include Masdar City’s Clean Energy Business Council, the Climate Bonds Initiative and the Gulf Bond and Sukuk Association. The group is now developing green sukuk for interested issuers, including governments, companies and development banks.

The Sultan of Perak State, Sultan Nazrin Muizzuddin Shah, spoke at the opening ceremony of the 14th Kuala Lumpur Islamic Finance Forum (KLIFF) 2017. He said Islamic finance has come far but there are at least six challenges at the moment. He said challenges at present include lower oil prices and changes in the global regulatory and supervisory framework. Sultan Nazrin said Islamic finance managed to cope better than its secular counterpart in terms of growth, albeit from a smaller base. Sultan Nazrin addressed the six challenges faced by the industry. In his view, the Islamic banking industry needs to improve profitability, the industry needs to maintain high standards of loan quality and corporate governance. Islamic capital markets need to grow at a faster pace, the negative trends of corporate issuances of sukuk need to be reversed. The Islamic equity market and takaful insurance need more development. Sultan Nazrin reminded that Islamic finance community must not be deviated from the objective of doing good.

#Malaysia is second only to Saudi Arabia in terms of Islamic banking in the world. Of the US$71 billion Syariah-compliant asset funds managed, 33% are in Malaysia. The country’s central bank, Bank Negara Malaysia (BNM) continues to raise awareness of Malaysia as an international Islamic financial centre. According to BNM assistant governor Marzunisham Omar, the next area of focus is quality growth. The 16 Islamic banks and 11 takaful operators are seeing value-returns by embarking on initiatives through Value-Based Intermediation (VBI). VBI is a business strategy by Islamic financial institutions, driven by a desire to create value rather than focus on short-term objectives. VBI is a business strategy of the institution to drive growth and sustain growth. It is a collaborative effort by the central bank together with Islamic banking institutions. Today nine Islamic banks are already involved and the central bank is working to develop a value-based scorecard to measure the success of banking institutions.

In #Malaysia the Federal Land Development Authority (Felda) will issue a RM2 billion long-term sukuk before the end of the year. Chairman Tan Sri Shahrir Abdul Samad added that apart from the sukuk, Felda is also finalising the sale of their hotel in London. Three years ago, Felda Investment acquired Grand Plaza Hotel in the upmarket Kensington area and this hotel became a status symbol for Felda. Shahrir likened the hotel sale to monetising non-core assets of Felda. Earlier in the year, Felda also made some money when it sold its 2% stake in Malayan Banking to the bank for RM280 million. The chairman also noted that sentiment among the settlers had improved considerably. Of the original 112,635 settlers, Shahrir said 94,956, or 84%, had continued to sell their fruits to Felda mills.

CIMB-Principal Asset Management (CIMB-Principal) announced the launch of its CIMB Islamic Global Equity Fund, the latest addition to its suite of 20 Islamic funds. The fund offers Malaysian retail and corporate investors an opportunity to tap into the growth prospects of global equities. It is currently available to investors in MYR with a minimum initial investment of RM500.The fund will invest a minimum of 70% and up to a maximum of 98% of its NAV in syariah-compliant global equities and equities-related securities. 28% of the Fund will be invested in sukuk, syariah-compliant money market instruments and Islamic Deposits. CIMB-Principal CEO Munirah Khairuddin says global equity markets continue to be in a sweet spot with strong earnings in both emerging and developed markets. She hopes to meet the target fund size of RM300 million in assets under management within a year of the fund’s inception.

The #Malaysian Employees Provident Fund (EPF) is prepared to increase its investments in shariah-compliant private equity (PE) funds. Deputy CEO Datuk Mohamad Nasir Ab Latif said the pension fund has not met its full asset allocation target for its PE segment. He noted that the fund allocated 10% to infrastructure and real estate investment, while PE investment currently stood at 4%, adding that there was a shortage of shariah-compliant funds in the domestic and international markets. He said EPF would continue to invest in both shariah-compliant and conventional funds concurrently. For the second quarter ended June 30, 2017, EPF's shariah-compliant savings accounted for RM820.71 million out of RM11.51 billion of its total investment income, while RM10.69 billion was generated from its conventional savings.

Islamic finance is exploring green bonds in order to develop Sharia-compliant financial products to invest in climate change solutions. Green Sukuk are Sharia-compliant investments in renewable energy and other environmental assets. Over $30bn worth of green bonds were issued in the second quarter of 2017. Issuance from emerging markets has jumped from $2.3bn to $9.2bn year-on-year versus 16% a year ago. Malaysia has the opportunity and ambition to be a leader in this space on the premise that Malaysia is already a leader in Islamic finance. Another active player on this front is the United Arab Emirates (UAE), which launched the Green Finance and Investment Support Scheme to promote green projects. Green Sukuk is a good model to finance sustainable infrastructure as well as help bridge the gap between conventional and Islamic finance. The most important challenge for Sukuk is gaining acceptance by international investors due to lack of standardisation and legal enforceability risk. Other challenges of green Sukuk include investor’s awareness, demand for energy supply, government support and demand for energy financing.

In this interview CIMB Islamic Bank CEO Mohamed Rafe Mohamed Haneef talks about the bank's achievements in Malaysia and its growth plans. The most significant segment for CIMB Islamic Bank is retail banking. When Haneef joined the bank, consumer banking’s contribution was between 40 and 45%, while at the end of June it was almost 60%. The bank came up with an embedded model which enables both CIMB Islamic and the conventional side from CIMB Group to tap the same talent. CIMB operates on two separate licences, but out of the same branches, as relationship managers offer both Islamic and conventional banking options. According to Haneef, the bank plans to focus on the Asean region first before eventually building inroads into the Middle East beyond 2018. CIMB Group’s Islamic Asset Management is in close contact with the Securities Commission (SC) and plans to contribute to the development of Sustainable and Responsible Investing (SRI).

In this interview Khairul Kamarudin, CEO of Bank Islam Malaysia, talks about his leadership style and areas of focus. Besides sustainability, the other main area of focus will be digitalisation. In 2016 the bank launched the innovative product called 'e-Donation' Terminal using Visa PayWave, a platform where donations can be made through the contactless electronic method using any debit/credit card. Bank Islam has also taken a step towards accepting fintechs with the recent strategic collaboration with Cognizant. This will allow the bank to embark more on innovative digital Islamic banking. In terms of charity, Bank Islam has its own Waqf project in its office building, which provides prayer facilities to more than 3,000 people per week. Also, the bank supports the affordable development project in Selangor and a school-construction project in the state of Perlis.

Cagamas announced its 14th issuance for the year, a three-year, RM1 billion sukuk, which represents Malaysia's first ever dual tranche sukuk reopening. Proceeds from the issuance will be used to fund the purchase of Islamic house financing from the financial system. CEO Datuk Chung Chee Leong noted that the final yield was priced competitively at a spread of 50 basis points over the three-year Government Investment Issue. He said as at September 8, 2017, Cagamas' secondary trading volume stood at over RM5 billion. He added that subscription from foreign-based investors indicates continued confidence in the company. The new issuance will bring the company’s aggregate issuance for the year to RM8.5 billion.

According to the Malaysian International Islamic Financial Centre (MIFC), the global sukuk market is set to continue its upward trajectory in 2017 as the fundamentals supporting their issuance remain intact. MIFC said global sukuk issuances stood at US$59.1 billion as of the first half of 2017 (1H17), an increase of 45.6% compared with 1H16. Malaysia continues to be the main driver in the Islamic capital markets, with the country commanding a 46.4% market share in sukuk issuance. As for outstanding sukuk, Malaysia's share stands at 52.6%. MIFC observed that Malaysia is the pioneer in the world's first green sukuk, as evident by the RM250 million of Islamic bond issued by Tadau Energy. Also, the regulator Securities Commission Malaysia is offering several incentives to attract green issuers including tax deduction on issuance costs, which is valid until the year of assessment 2020.

The World Bank has praised Malaysia for financing sustainable, climate-resilient growth. Victoria Kwakwa, World Bank regional vice-president for East Asia and Pacific, said Malaysia’s innovative green sukuk initiative would help close the gap for both infrastructure and green finance. In July, Tadau Energy issued the Green SRI Sukuk Tadau, the RM250 million Sustainable Responsible Investment shariah-compliant bond, which holds a tenure of up to 16 years. It will finance a 50-megawatt solar power plant. Kwakwa said the framework underlying this instrument was the result of collaboration between the Securities Commission of Malaysia, the Malaysian Central Bank and the World Bank Group. She said the World Bank issued US$10 billion in bonds through the green bond programme since 2008 and new issuances in the global market are expected to exceed US$120 billion this year.

Hong Leong Islamic Bank (HLISB) has pledged RM350 million for the Bumiputera Agenda Steering Unit (TERAJU) via its new Bumiputera companies programme. Of that amount, RM225 million will go to working capital and the balance for asset acquisition. The programme aims to increase Bumiputera SME's participation in the Malaysian economy by enabling small medium enterprises (SMEs) to scale up and compete in the open market. HLISB chief executive officer Jasani Abdullah said the bank targets to provide financing facilities to between 20 and 30 companies annually. He pointed out HLISB would be focusing on industries such as construction and infrastructure, telecommunications, agriculture, manufacturing and green technology sectors. Meanwhile, TERAJU chief executive officer Datuk Husni Salleh said HLISB's participation would assist Bumiputera participants to expand locally and overseas.

Six Malaysian Islamic banks have agreed to jointly develop a waqf fund which focuses on projects in four areas — economic empowerment, education, health and investment.
The banks are namely: Affin Islamic Bank Bhd, Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat), Maybank Islamic Bhd and RHB Islamic Bank Bhd . They have signed a Waqf Fund Strategic Collaboration Agreement.

The strongly growing popularity of Islamic banking and Islamic finance and its increasing global spread has led to a considerable undersupply of talent in this sector. Both the Middle East and Southeast Asia, but also new regions currently adapting to the alternative finance system such as in Africa and Central Asia are effected.

Estimations are that there is a shortfall of between 8,000 and 10,000 in main Islamic finance fields in Gulf Cooperation Council countries alone, plus more in peripheral sectors such as law and regulatory affairs, financial technology, insurance and others. Altogether, as the industry continues to grow, at least 56,000 people will be needed to serve the Islamic financial sector in the coming years, according to the Finance Accreditation Agency of Malaysia.
“Islamic banking assets in six core markets – Qatar, Indonesia, Saudi Arabia, Malaysia, the UAE and Turkey – are estimated to reach a combined asset volume of $1.8tn by 2019,” says Dr. Amat Taap Manshor, the FAA’s CEO. “But the human capital meant to support the industry is still in its infancy, and shortages will be felt most acutely in the capital market sector,” he added.

Permodalan Nasional BHD is pushing for much bigger Islamic financial activities in order to turn Malaysia into a centre of global Islamic banking. In an interview to mark his one-year stint in the country’s largest unit trust fund, group chairman Tan Sri Abdul Wahid Omar explains how PNB and its strategic companies will intensify efforts to boost syariah-based investment and financing products.
Regarding the Islamic finance agenda being so important to PNB it was asked, if it is tied to the government’s objective of making Malaysia the Islamic financial hub of the world.
Mr. Tan Sri Abdul Wahid Omar answered: „Indeed, if you look at the aspirations of our unitholders, they want syariah-compliant unit trust funds. I think this was why back in 2008, there was a fatwa that investments made in Amanah Saham Nasional Bhd were permissible. This fatwa was issued at the national level and 10 states adopted the fatwa, excluding Selangor and Penang. Over the past year, we had been engaging with the Selangor Mufti Department and based on those engagements, they revised their fatwa positively. So starting from April, investments in ASNB funds are “harus”.