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Malaysian Islamic lender eyes Australia, Philippines

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Points of essence:

  • AmIslamic Bank seeks to venture out outside GCC countries as it is expanding in Indonesia, Australia  Philipines and Vietnam. The third largest Malaysian Islamic lender with $2.94 billion of assets said the GCC market is saturated and it’s much easier to penetrate into non-traditional islamic banking market.
  • The scope of Islamic business is diffrent in those countries where AmIslamic is eyeing Shariah based financing in Indonesia, sukuk market in Australia, Islamic retail and commercial business in the Philippines and the sharia-compliant property market in Vietnam.

By Liau Y-Sing

KUALA LUMPUR, Sept 2 (Reuters) – Malaysian lender AmIslamic Bank may tap Indonesia’s sharia retail market and expand into Australia and the Philippines as it seeks growth in non-traditional Islamic markets, its chief said on Tuesday.

Malaysia’s third-largest Islamic lender with about $2.94 billion of assets, is also considering a move into Vietnam although the country’s recent economic developments have made it slightly wary, AmIslamic CEO Ahmad Zaini Othman said.

“It’s easier to penetrate the markets outside the GCC (Gulf Cooperation Council),” Zaini said in an interview.

“It’s a lot easier to educate and approach those markets where they have not even heard of Islamic banking. The GCC market is a bit saturated.”

The Middle East has been a magnet for Islamic lenders looking to ride on the industry’s boom, due to its vast reserves of oil earnings and large Muslim population.

In contrast, neighbouring Indonesia is a late bloomer in the $1 trillion Islamic finance sector, with sharia banks having less than 5 percent of Indonesia’s domestic banks’ total assets.

With about 85 percent of its 226 million people of the Muslim faith, Indonesia is seen as offering a ready-made market for sharia lenders, and the government is pushing the industry’s growth, having last month issued its first Islamic bond and introducing market-friendly measures such as allowing Islamic lenders to trade their sharia bonds in the secondary market.

AmIslamic is part of AMMB Holdings Bhd , Malaysia’s fifth-largest banking group in terms of assets.

Australia and New Zealand Banking Group Ltd owns a 20 percent stake in AMMB which, according to Reuters data, was the world’s third-largest Islamic bond manager last year, with $3.6 billion of deals — nearly a tenth of the total market.

Zaini said many Australian energy and resource companies are keen to sell Islamic bonds, or sukuk, offering AmIslamic a platform to enter the market.

“If you look, in this day and age, at the present liquidity issue, if it’s new money coming into the country and a viable option, why not?” he said, but declined to elaborate on potential sukuk issuers.

Australia, where an estimated 1 percent of the population are Muslims, has a nascent but growing Islamic finance industry.

Kuwait Finance House , the Gulf state’s biggest bank by market value, said in July it was looking at Australia as competition increases at home. National Australia Bank was reported last month to be planning a $35 million investment in a sharia-compliant listed industrial property trust.

AmIslamic is also considering the Islamic retail and commercial business in the Philippines and the sharia-compliant property market in Vietnam, Zaini said.

AMMB has a strong domestic retail business, controlling more than a fifth of Malaysia’s car financing market.

SHARIA-BASED, NOT SHARIA-COMPLIANT

Islamic assets total around $1 trillion, estimates the Asian Development Bank, with annual growth of 10-15 percent a year. But Zaini said the industry lacks longer tenure products, with investors generally reluctant to commit to Islamic products long term as sharia instruments cannot offer some of the guarantees given by their conventional peers.

“In the simple fixed deposit for instance, versus the Islamic general investment account, we can’t really promise a return because it’s based on the profit and loss sharing determined at the tail end,” Zaini said. He said the industry is also grappling with a lack of global uniformity in legislative and sharia principles. “We are still facing the task of creating a kind of uniformity within various jurisdictions,” he said.

“If you were to compare with the conventional banking world, uniformity in the issuance of bonds is very clear cut. You issue bonds in London, you issue bonds in Singapore, the expectations of the investors as well as the players are all there.”

He said the lack of uniformity can partly be overcome by offering more sharia-based products rather than sharia-compliant products that are conventional instruments adapted to meet Islamic standards — the latter which are rejected by Middle East investors.

AMMB shares have fallen more than 21 percent this year, slightly outperforming a 25 percent drop on the broader stock index (Editing by Ian Geoghegan)

Source: http://www.guardian.co.uk

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Written by Suapi Shaffaii

September 3, 2008 at 6:14 am

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