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Islamic banking remains resilient on continuous innovation of Shariah products

07/10/2022 04:59 PM

KUALA LUMPUR, Oct 7 (Bernama) -- The Islamic banking industry remains resilient and dynamic, supported by continuous innovation of Shariah-compliant products.

The Ministry of Finance (MoF) in its Economic Outlook 2023 report released today said the introduction of the Malaysia Islamic Overnight Rate (MYOR-i), a fully Shariah-compliant benchmark rate, on March 25 this year, is expected to boost the development of more innovative Shariah-compliant financial products.

“The MYOR-i will enhance transparency by enabling market players to negotiate and standardise their financial contracts, thus achieving efficient pricing across all financial instruments.

“The establishment of the MYOR-i will also help deepen the onshore Islamic financial market and enhance the role of Shariah-compliant financing for domestic economic activities,” it said.

The MoF highlighted that as of end-July 2022, the total Islamic banking assets grew by 5.7 per cent to RM1.20 trillion, constituting 35.7 per cent of total banking assets.

Meanwhile, it noted that total Islamic financing expanded by 12 per cent to RM774.1 billion, wherein the growth was primarily contributed by household sector financing, which increased by 11.8 per cent to RM491.3 billion as of end-July 2022, accounting for 63.5 per cent share of the total Islamic financing.

The financing was mainly for the purchase of residential properties (51.9 per cent), and purchase of transport vehicles, particularly passenger cars (19.8 per cent), the report said.

On another note, the ministry said monetary policy is anticipated to remain supportive and accommodative of growth in an environment of moderate inflationary pressures.

Future monetary policy stance will continue to be guided by the Monetary Policy Committee’s (MPC) assessment of evolving conditions and their implications on the overall outlook on domestic inflation and growth, the report said.

Moving forward, it said financial institutions are expected to continue to be robust backed by prudent management, sufficient liquidity and strong capital buffers, and similarly, the capital market is expected to remain resilient, underpinned by sound macroeconomic fundamentals, ample domestic liquidity, and comprehensive capital market infrastructure.

“The transition towards endemicity, reopening of international borders, strong domestic growth momentum, and ongoing strategic projects, among others, will provide the impetus for better overall financial market performance in 2022,” it said.

Nonetheless, it shared that weaker global growth prospects, aggressive pace of monetary policy tightening by the US Federal Reserve, heightened volatility in global financial conditions, prolonged conflict in Ukraine, and strict measures to curb COVID-19 in China pose as headwinds.

In light of these challenges, MoF said the Capital Market Masterplan 3 (2021 - 2025) and Financial Sector Blueprint (2022 - 2026) will encourage greater diversity and increase dynamism in the financial market in tandem with the evolving economic and financial landscapes.

Hence, the resilience of Malaysia's financial market will be enhanced while safeguarding financial stability and integrity, it added.


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