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New areas needed to boost portfolio

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Points of Essence:

  • The Islamic financial industry is urged to venture out for new areas of business to sustain growth in the current challenging economic climate . Islamic banks should try out foreign currency business deals via licensed ICBU vehicles as well as delve into the property development and car businesses. The Star Biz has the report.


KUALA LUMPUR: The Islamic finance industry must look for new areas of business to develop its current portfolio and help grow earnings in the current challenging economic environment, says the Association of Islamic Banking Institutions Malaysia (AIBIM).

Executive director Mohamed Rithuan Mohamed Shamsudin (pic) sees several areas of business that Islamic finance players can look at developing to grow their portfolio.

First is to tap into foreign currency business deals via local Islamic banks’ international currency business units (ICBUs) and international Islamic banks, such as Unicorn International Islamic Bank, which can only conduct business in foreign currency.

“This will promote Malaysia as a financial hub. It will also enable the ICBUs to tap into the wealth management business – where we manage foreign investors’ funds, especially those from the Middle East,” Rithuan said.

Second, Islamic banks can also conduct other businesses besides banking – such as delving into the property development and even car business.

Rithuan cited the example of Kuwait Finance House (M) Bhd, which gained prominence through its participation in some high profile property development projects.

To help facilitate the growth of Islamic finance in the country, AIBIM is in the midst of standardising documents such as legal documents, counter party agreements among banks, hire purchase and mortgage documents among others to speed up transactions.

It is also standardising some critical criteria in Islamic financing products, such as home financing products, to reduce confusion and promote acceptability in the courts if there is a legal dispute.

Rithuan would also like to have an Islamic Hire Purchase Act to clear up any disputes on hire purchase issues.

He said Islamic banks had not tightened credit but were still providing financing to the public.

“However, applications are fewer now and banks also tend to be more cautious in providing loans,” he noted.

Rithuan is optimistic that the government guarantee schemes announced in the recent mini budget will help boost lending.

The RM5bil Working Capital Guarantee Scheme and the RM5bil Industry Restructuring Loan Guarantee Fund Scheme will limit banks’ risk exposure to only 20% of new loans, while the balance 80% will be covered by a government guarantee.

Bank Negara statistics show that the Islamic banking sector recorded double-digit growth over the last eight years with an average annual growth rate of 20% in terms of assets.

AIBIM, which was established in 1995, currently has a membership of 20 Islamic banking institutions.



Written by Suapi Shaffaii

March 31, 2009 at 9:30 pm

Posted in Articles

Tagged with ,

One Response

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  1. This blog’s great!! Thanks :).


    April 1, 2009 at 8:58 am

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