IslamicFinance.de

Malaysia’s pledge to minimise its greenhouse gas emissions by 2030 is facing challenges in terms of a mismatch in demand and supply of fundings. Bank Negara Malaysia (BNM) assistant governor Fraziali Ismail said that considerable funding gaps remain in sustainable projects, despite the roll out of green financing schemes. Fraziali emphasised that there is a need to find a way to bridge the language and information gap between scientists, government and financiers. He also emphasised the role of the financial sector, particularly that of the capital market, in driving Malaysia’s sustainable development through the sukuk market.

The world’s fourth largest cocoa grinder Guan Chong (GCB) is undertaking a sukuk exercise for its future expansion plans. It is launching a sukuk wakalah programme of up to RM800mil in nominal value. According to managing diector Brandon Tay Hoe Lian, proceeds from the first tranche of issuance of RM300mil will go towards funding the ongoing construction of a new cocoa grinding facility in Ivory Coast, which is set to commence operations in the second half of 2021. The programme will also support the company's expansion in Europe, following the acquisitions of industrial chocolate provider Schokinag in Germany and the land and building in United Kingdom.

Malaysia has over one million SMEs (small and medium enterprises) making up 98% of total businesses. The majority are micro SMEs, of which 21% are owned by women. One industry in which Malaysian SMEs could become a world pioneer is Islamic fintech. Islamic finance is now entrenched in Malaysia, accounting for 32% of financing to customers. Yet, according to the IMF, Islamic fintech is still in its infancy. In Malaysia, the growth of Islamic fintech can impact development in rural areas among Malays, offering this community a unique financial-inclusion opportunity.

Sustainable investing is increasing in popularity as more investors and companies prioritise the need to act responsibly in order to create a positive lasting impact on the community and the environment. Shariah-compliant investing shares many similarities and goals with sustainable investing. Governments, institutions and the younger generation are more concerned about environmental issues such as climate change. As such, they demand more independent governance structures and want corporations to fulfil social responsibilities. Maybank Asset Management recently launched the Maybank Global Sustainable Equity-i Fund, its first actively managed shariah-compliant ESG fund that invests in both shariah-compliant and sustainable companies in the global markets. A minimum of 80% of the fund will be in shariah-compliant equities and shariah-compliant related securities. The rest of the fund will be invested in Islamic liquid assets.

The International Islamic Trade Finance Corporation (ITFC) signed a US$100 million Murabaha-structured line of trade finance with Mizuho Bank Malaysia, a subsidiary of Mizuho Bank Japan. This financing will help ITFC extend its support to the member countries under its COVID-19 Response Plan. The financing is ITFC’s first partnership with a Japanese bank, signalling an expansion of its partners around the world. The virtual signing ceremony took place between Eng. Hani Salem Sonbol, CEO ITFC and Mr. Shojiro Mizoguchi, the Managing Director & CEO, Mizuho Bank (Malaysia) and witnessed by Mr. Hidekatsu Take, the Managing Executive Officer of Mizuho Bank.

Asia Pacific Investment Bank (APIB) will be launching an Islamic digital finance fund in Malaysia to invest in shariah-compliant financial technology (fintech) start-ups. The fund will be launched in collaboration with OUD Asset Management, a boutique fund management company. APIB director Datuk Foo Yong Hooi said the bank also collaborates with Ripple to explore ways to facilitate cross-border transactions more efficiently. According to Foo, the collaboration with OUD is very important now as the financial industry is adopting digital transformation at a pace faster than ever before, and this fund would be able to support the digital economy transformation of Malaysia.

The Islamic fintech space is growing in Malaysia, with recent entrants and an expanding consumer base. Government support and related initiatives are helping to drive the sector’s development. There are currently some 26 Islamic fintechs operating out of the country. While Malaysians have the possibility to bank in a Shariah-compliant manner, Islamic fintech has not yet reflected the same range of services that conventional fintech has offered, particularly in North America, Europe and China. Such gaps in the market have yet to be tapped, but there is a ready market for such services. A new digital bank could drive sectoral development, with Bank Negara Malaysia granting five licenses, with one potentially an Islamic provider.

Shariah-compliant investments are resilient and even tend to perform better than their conventional peers in troubled times. This was proven during the first half of the year, when the average returns of global and Malaysian equity shariah funds were higher than those of their conventional counterparts. Ismitz Matthew De Alwis, executive director and CEO of Kenanga Investors, notes that shariah funds in general have outperformed due to their lack of exposure to the banking sector and a higher weighting in defensive sectors such as healthcare and telecommunications. Despite signs of improving economic data, De Alwis expects the equity market to remain volatile. As the market grapples with the risk of surging Covid-19 infections, governments could be forced to reimpose restrictions on business activities.

Bitcoin Association has joined the inaugural Islamic Fintech Week 2020 as a sponsor and ecosystem partner. The three-day event will bring together stakeholders, regulators and innovators to chart the future of financial technology in the Islamic world. This year’s IFW2020 will be hosted in Malaysia from September 7-10. It will feature a themed series of panel debates, roundtable sessions and masterclasses. Topics on the agenda for the virtual event will include the role of Shariah in Islamic fintech, how Malaysia can become a global finance hub, fintech’s role in the recovery from the COVID-19 pandemic and the social impact of Muslim women in finance. Digital currencies and blockchain will also feature heavily in the event, with various guests set to address how they can be integrated into the Islamic finance industry.

Kenanga Capital Islamic (KCI) has collaborated with a financing company Bay Group Holdings to enhance digitisation in the local factoring market. The collaboration will introduce a maiden local solution to the local factoring market through merging private and public sectors under a platform to tap into an underserved market, which is expected to grow fivefold from its current RM20 billion value. The partnership with Bay is expected to advance KCI’s position in the factoring market, reduce its overall operational costs as well as improve its efficiencies. Registered and regulated by the Securities Commission of Malaysia in 2016, Bay provides innovative digital solutions through its supply chain management platform and Bay P2P financing platform.

The Malaysian government has launched the RM500 million Sukuk Prihatin which aims to raise funds from the public and corporates who wish to help contribute towards the Covid-19 Fund. Prime Minister Tan Sri Muhyiddin Yassin said the fund would be used to modernise telecommunications network in the rural area to help students get access to education through digital channels. It is also to provide further assistance to the micro, small and medium enterprises, as well as the healthcare sector's research on infectious diseases. The minimum subscription for the first investment is RM500 with an interest of 2% per annum for a tenure of two years. After the tenure ends, subscribers or investors can opt to fully donate the interest to Covid-19 Fund and will be given a tax relief depending on the size of the donation.

Asia Pacific Investment Bank (APIB) aims to cooperate with domestic financial institutions to promote the internationalisation of the Islamic finance industry. APIB CEO Chris Wang is confident that APIB could be the bridge that connects Malaysia and China. In light of the US-China trade war and the Covid-19 pandemic, the government is facing a critical challenge in leveraging the country’s position. Wang said APIB could help the government achieve the goal by making the country’s Islamic finance industry more dynamic. APIB is an offshore Islamic investment bank, established in January 2015 with the approval of the Labuan Financial Services Authority, headquartered in Labuan and its main operating office based in Kuala Lumpur, with representative offices in Shanghai and Nanjing, China.

According to Malaysian Rating Corp (MARC) chief ratings officer Rajan Paramesran, domestic corporate sukuk are in a better position than during the global financial crisis or the Asian financial crisis. Going into the current crisis, corporate sukuk had relatively stable cashflow metrics. He added that government-supported transport projects, state-backed water infrastructure projects and solar power plant projects have recently been and will be key sources for sukuk issuances. Rajan said the catalyst for the growth in the Islamic debt market continues to be government incentive on susuk issuances such as tax reduction. Based on MARC’s data, corporate sukuk issuance by the end of July 2020 amounted to RM34.3 billion, which is the lowest to date over the last 10 years and dampened by the Covid-19 pandemic. In a separate report, Moody’s said Malaysian Islamic banks are expected to remain resilient amid the Covid-19 outbreak, underpinned by heavy concentration on retail financing.

Dr. Umar Oseni said that the collaboration between Islamic finance practitioners and academia will be vital to the development of Islamic Finance Law in Nigeria. Dr. Umar Oseni also said that western models dominate financial markets and that conventional banking has existed for over 200 years, while the Islamic finance reemerged towards the end of the last century with Tabung Hajji, West African Muslim Bank, and IsDB which was established in 1975 and this has brought improvement in the Islamic finance industry.

The stakeholders of the Islamic fintech space have determined nine strategic priority areas that will further reinforce and enhance financial inclusion in Malaysia. These include the setting-up of a national Islamic fintech taskforce; the renewed focus of enhancing digital and Islamic financial literacy, especially within B40 segment; developing smart partnerships among ecosystem players; and ensuring there was greater readiness among Islamic institutions to embrace digitalisation. The priority areas were drafted during the Islamic Fintech Dialogue 2020: Driving Financial Inclusion through Islamic Fintech held virtually in May. Malaysia Digital Economy Corporation (MDEC) CEO Surina Shukri said the end-goal was to empower the B40 group and the micro, small and medium enterprises.

CIMB Bank is looking for a director, Islamic marketing, communications and CSR, group Islamic banking (GIB). The appointed individual will develop and enhance the CIMB Islamic brand platform in line with business aspirations. The individual will also offer strategic marketing and communications support to GIB consumer banking, commercial banking, transaction banking, wholesale banking and asset management. The individual is expected to have at least 10 years of experience of relevant banking background in established banks or financial institutions, in-depth knowledge of Islamic marketing, communications and corporate responsibility, and working knowledge of Shariah and governance.

In Malaysia Islamic finance has demonstrated its resiliency in this difficult time with continuing issuances of green and sustainable sukuk, a trend that will continue over the short-to-medium term. To this end, Malaysia’s Employees Provident Fund (EPF) is enhancing its focus on integrating different ESG initiatives into its investment strategy. EPF conducts negative screening and excludes those stocks that it considers unethical. It engages very closely with the investee companies, regulators and asset managers, and has a rating tool to assess the quality of ESG adoption. Banks in Malaysia are also pushing various ESG initiatives. This comes as Bank Negara Malaysia, is coming up with a taxonomy that defines a green loan and ensures that banks indicate whether certain loans are green and, if so, how green they are.

According to Bursa Malaysia chairman Tan Sri Abdul Wahid Omar, the potential of the Islamic capital market remains promising both in Malaysia and abroad. During his keynote address at the Shariah Investing Virtual Conference 2020 Abdul Wahid said that in Malaysia alone, the industry of Islamic funds had demonstrated impressive growth. As of March, syariah funds stood at RM170 billion, representing 23% of total industry assets under management (AUM). Syariah unit trust funds' net asset value (NAV) stood at RM99 billion. Abdul Wahid added that there are opportunities for further product innovation and development to provide investors with more syariah-based products.

Malaysia’s Islamic finance sector is expected to sustain double-digit growth to reach almost RM3 trillion in 2020 under the second Capital Market Masterplan. The chairman of Bursa Malaysia, Tan Sri Abdul Wahid Omar, said the country’s Islamic funds industry has demonstrated impressive growth. The country is the third-largest market for global Islamic finance products and the world’s largest Sukuk issuer. At Bursa Malaysia 79% of the listed companies are Shariah-compliant and Shariah market capitalisation makes up 70% of the total market capitalisation of RM1.6 trillion. Over the last ten years Shariah indices consistently outperformed its conventional counterparts. Thus, Shariah-compliant investments are an attractive source of value for investors.

When Muslims fail to draw up a will outlining the proportion of distribution of their assets to their heirs, families resort to faraid, the Islamic law of inheritance, which can lead to disputes. According to sociologist Prof Datuk Dr Mohammad Shatar Sabran, many Malays are still not aware of the importance of naming the heirs to their estate beforehand. The concept of hibah would be an alternative and more effective way. It refers to the transfer of legal and beneficial ownership of assets from the donor to the beneficiary on a voluntary basis, with the proportion and distribution to heirs and non-heirs being determined by the donor. Money left in accounts without the hibah instrument is categorised as part of the estate of the deceased account holder and, as such, the heir will have to go through a lengthy application process to claim the money.