KUALA LUMPUR, May 17 (Bernama) -- Moody’s Investors Service (Moody’s) expects strong Islamic finance growth in Malaysia to continue over the next 12 to 18 months supported by more government initiatives and digital banking.
Financial institutions group analyst Chong Jun Wong said similar to other key Islamic markets, the growth of Islamic banks in Malaysia has actually outpaced the growth of their conventional peers in recent years.
“This is supported by a few things. Firstly, the value-based intermediation (VBI) framework established by the government in 2018 as well as the enhancement of digital capabilities of smaller Islamic banks and the ‘Islamic First’ strategy implemented by the major banking groups,” he said in a webinar titled “Growth In Malaysia’s Islamic Finance Resilient Despite Challenges” today.
He said the government also released five digital banking license last year, which was awarded to Islamic finance.
Besides that, he said the plan to develop the Halal economy as illustrated by the Halal Industry Master Plan 2030, which was released earlier this year, and the Financial Sector Blueprint (FSB) released last year is expected to drive the demand for Islamic products.
“Islamic finance accounted for around 40 per cent of the total financing in Malaysia, which is one of the highest when compared to peers across key markets.
“So with the policy support, we expect the penetration of Islamic finance in Malaysia to continue to grow,” he said.
Chong said the Islamic First strategy implemented by large banking groups has also contributed to the high penetration of Islamic finance.
“With this strategy, banks are committed to grow their Islamic banking business and they will do so by prioritising the Islamic product to customers,” he said.
Additionally, he said Islamic banks in Malaysia also have an extensive suite of products and services to meet the needs of its customers as well as trade finance as part of the support for growing the halal economy in Malaysia.
He said the Islamic banks have created programmes to support small and medium-sized enterprises (SMEs) on functions such as halal certification and training.
He added that this would help to increase the adoption of Islamic finance by halal-certified companies.
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