BUSINESS

KLIFF: ISLAMIC CAPITAL MARKET PROVED RESILIENT DURING PANDEMIC, SAYS SULTAN NAZRIN

09/03/2021 03:21 PM

KUALA LUMPUR, March 9 -- The Islamic capital market has proved resilient during the COVID-19 pandemic and created an enormous impact on economies around the world, with global sukuk issuances growing in 2020, said Sultan of Perak, Sultan Nazrin Shah.

He said a total of US$172.1 billion sukuk was issued last year, an increase of 1.8 per cent from 2019.

“There was strong momentum in key sukuk markets, especially during the first nine months of 2020. These issuances helped to finance the sweeping stimulus packages introduced to alleviate the economic impact of the pandemic.

“This growth of fiscal deficits has resulted in rising financing requirements,” he said in his opening remarks at the 16th Kuala Lumpur Islamic Finance Forum (KLIFF) held virtually, today.

Sultan Nazrin noted that sukuk issuances tailed off in the fourth quarter, with a marked reduction in Gulf Cooperation Council (GCC) sovereign sukuk issuances, particularly from Saudi Arabia.

This reflected the success of the capital raising carried out in the previous quarters, as well as other measures taken to narrow deficits, he said.

Domestically, he said, Malaysia had also tapped such source of financing and raised RM666 million in August 2020 for its ‘6R’ initiative - Resolve, Resilience, Restart, Recovery, Revitalise and Reform, in response to the crisis.

“A second issuance of at least RM100 million is planned, to fund research on infectious diseases, including vaccine development, treatment and diagnostics,” he revealed.

Sultan Nazrin acknowledged that the overall Islamic Finance industry suffered a slowdown in 2020 due to the pandemic as compared with robust growth of 13 per cent in 2019, with many Muslim countries having to also adjust to historically low oil prices.

“According to one indicator from the United Arab Emirates, Islamic banking penetration, that is, the percentage of customers who have any Islamic finance product, fell in 2020 for the first time since measurement began in 2015.

“Market penetration was only 47 per cent back then but had risen steadily to reach 60 per cent by 2019, before falling slightly to 58 per cent in 2020.”

He said one particular challenge faced by Islamic banks was their greater exposure to small and medium-sized enterprises, microfinancing and retail customers, compared with conventional financial institutions.

“This sector has suffered excessively in the economic lockdowns required to manage the pandemic,” he noted.

Meanwhile, Sultan Nazrin hopes that stakeholders in the global financial markets would step forward and boost their contributions in supporting and re-energising the United Nations’ Sustainable Development Goals (SDG) initiatives.

He described the impact of COVID-19 on the most vulnerable groups of the global community as very concerning as the pandemic had also likely in a significant way hindered progress on some of the key performance indicators of SDGs.

“Already marginalised sections of society face deepening poverty, because economic lockdowns have reduced employment and incomes in the sectors in which they predominate.

“This means that we must do more to support and re-energise SDG initiatives. This is a worthy and important endeavour, to which we must all try to contribute in whatever way we can,” he said.

He pointed out that Islamic finance has a close relationship with the SDGs and could play a key role in achieving the goals, through financial inclusion.

“An important mechanism for tackling poverty is to extend the benefits of financial intermediation to as much of society as possible,.

“However in practice, many remain outside the formal banking sector due primarily to the high costs involved in reaching out to lower-income groups to provide them with financial services,” he said.

Sultan Nazrin believes the use of technology is the greatest solution, reducing the need for physical contact and also bridging the long-standing communication gaps with lower income groups.

“This should contribute to greater financial inclusion, and through this mechanism, to poverty alleviation,” he said.

He said smart technologies have boosted the speed, accuracy, transparency and traceability of transactions, while strengthening customer profiling, predictive abilities, decision-making, and impact measurement.

“The new standards achieved in all the areas have quickly become essential requirements in the competitive and tightly regulated world of modern finance. Islamic financial institutions are well-placed to embrace these new approaches to banking.

“Through the application of smart algorithms and the use of big data analytics and Artificial Intelligence, they can serve all segments of the community more effectively and at a lower cost. In this way, they can not only fulfil their goals as businesses, but also contribute to our shared moral imperative to help those in need,” he added.

-- BERNAMA

 

 

 


 


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