legal guide09.indd - Islamic Finance News

The Development of Islamic Banking and Finance (continued..)
laysia. These, together with two originally dedicated
Islamic banks — Bank Islam Malaysia and Bank Muamalat
Malaysia — and three wholly foreign-owned
Islamic banks — Kuwait Finance House (Malaysia), Al
Rajhi Banking & Investment Corporation (Malaysia)
and Asian Finance Bank — make a total of 17 Islamic
banks licensed under the Act.
Liberalization of the financial sector
In April 2009, the Government announced a financial
sector liberalization plan under which, among others,
two new licences will be issued for two mega Islamic
banks (each having a minimum paid-up capital of
US$1 billion) to be established in the country. The
plan also announced an increase in foreign equity
limits in local Islamic banks of up to 70%, and that
such banks must maintain a paid-up capital of US$1
billion.
Islamic capital market
The governing body for capital markets is the
Securities Commission of Malaysia, which plays a
major role in the development and proper regulation
of Islamic capital market (ICM) activities. Among
others, it has issued guidelines for Islamic debt
securities and Real Estate Investment Trusts (REITS).
The guidelines for Islamic REITS, issued in late 2005,
were the first in the global Islamic finance sector
and set a global benchmark for the development of
Islamic REITs.
The Malaysian ICM is a robust and active market and
the number of Sukuk issuances, for example, has
increased phenomenally over the years. Malaysia is
the largest Sukuk issuer in the world, representing
60% of global Sukuk in 2008.
The listing of Islamic REITS has given the Islamic capital
market another boost. The Al-Aqar KPJ Healthcare
REIT (the main assets were seven hospitals) was
listed on the Malaysian stock exchange in 2006, making
it the first listed Islamic REIT. The Al-Hadharah
Boustead REIT is the first Islamic plantation-based
REIT, issued and listed in 2007.
The future
Although much has been done in the last quarter of
a century to develop and promote Islamic banking
and finance, its full potential remains to be tapped.
There is tremendous scope for innovation in the type
of Islamic products that can be offered.
The recent economic turmoil in the US and other
countries offers a marvellous opportunity to
promote Islamic banking and finance. This can help
to bring about the dawn of a new global economic
order and an alternative banking system, that is in
many respects, superior to the present conventional
one.
Mohamed Ismail Mohamed Shariff is a partner
at Skrine in Kuala Lumpur, Malaysia. Refer to his
profile on page 16.
Furthermore, Malaysia has achieved many world’s firsts in Sukuk issuance:
Year Issuer & Size Description
2001 Kumpulan Guthrie – US$150 million First global corporate Sukuk
2002 Government of Malaysia – US$600 million First global sovereign Sukuk
2005 Cagamas MBS – US$540 million First Islamic residential mortgage- backed securities
2006 Khazanah Nasional (Rafflesia Capital) – US$750 First exchangeable Sukuk
million
2007 Binariang GSM – US$4.8 billion Largest global Sukuk issuance as at the end of 2007
8