Tuesday, January 19, 2010

Malaysia plans to establish an "iconic" centre to house all its Islamic financial institutions.

Solid principles enable Islamic banking to weather global crisis

Kuala Lumpur plans to establish an "iconic" centre to house all its Islamic financial institutions.

By Jumana Al Tamimi, Associate Editor, Gulf News

  • Abdul Razzaq says Malaysia's distinguished classification in Islamic finance is among the factors that bring it closer to the Arab region in general and the Gulf countries in particular.
  • Image Credit: Ravindranath/Gulf News

Abu Dhabi: The Islamic banking system has managed to "weather" the global international financial crisis due to its well-regulated foundation, Malaysian Prime Minister Mohammad Najeeb Bin Abdul Razzaq said.

In an exclusive interview with Gulf News during his visit to the UAE on Sunday, the prime minister of the biggest Islamic finance centre in the world also revealed that Kuala Lumpur plans to establish an "iconic" centre to house all its Islamic financial institutions.

"Islamic finance has by and large been able to weather the global economic crisis because it is based on strong fundamentals, and [because] Islamic finance didn't depart from its fundamental principles," Abdul Razzaq replied to a question on the impact of the international financial crisis on Islamic finance structures.

Islamic finance was unlike "conventional" banking, which has many "new financial products that were not based on fundamentals but operated on different premises", he said.

Last year, Malaysia "managed to attain double-digit growth, and this has been the case for some time… the latest figures show that more than 60 per cent of sukuks were issued in Malaysia," Abdul Razzaq said during the interview conducted on the sidelines of the Future Energy Summit held in Abu Dhabi.

The Malaysian premier, accompanied by a high-level delegation including the ministers of foreign affairs and trade, also held talks with the UAE's leadership, including His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, and General Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.


Malaysia is considered the world's leader in Islamic finance and is still "well-positioned" to continue playing this role, Abdul Razzaq said.

The Asian country's plans for financial liberalisation included "the issuance of two licences for two mega-Islamic banks in Malaysia, with a capital of more than $1 billion each. We received very encouraging interest to participate in the new Islamic banks that we have announced."

Moreover, Kuala Lumpur is currently working with its central bank on having an "iconic physical centre that will house our Islamic institutions that deal with Islamic finance," he said.

Malaysia's distinguished classification in Islamic fin-ance is among the factors that bring it closer to the Arab region in general and the Gulf countries in particular, the Abdul Razzaq said. Other factors include "strong emotional and spiritual" relationships, bountiful opportunities on both sides, halal food production and real estate development.

Accordingly, it is just "a kind of opportunity for us to build upon" strong bilateral relations, Abdul Razzaq said. "Ever since Islam reached the shores of our part of the world, we have enjoyed this strong emotional and spiritual [bond] with this part of the world, and that [bond has] remained strong until today. And because of this natural affinity, and natural identification with this part of the world, trade flows naturally," he said.

Abdul Razzaq's visit to Abu Dhabi was the second since he became prime minister in April 2009. It aims at boosting bilateral relations in many fields, including economic.

In 2008, the UAE was Malaysia's 17th largest trading partner, 15th largest export destination, 20th largest source of imports and the largest trading partner in the Middle East, according to Malaysian press reports.

Trade between the UAE and Malaysia reached more than Dh12.9 billion between January and October 2009.

Fact file: Strong numbers

Dh12.9b - trade between UAE and Malaysia

$2b - capital of two Islamic banks in Malaysia


It is very interesting to learn about shariah scholars who are playing key Shariah advisory roles in this part of the world.

Notably, the presence of Dr Mohammad Daud Bakar, formerly Deputy rector of the International Islamic University of Malaysia.

The below entry is very informative:-

Top Shariah scholars in GCC: Funds@Work

By Habhajan Singh
Local Islamic finance expert Dr Mohamed Daud Bakar and Pakistan retired Supreme Court justice Sheikh Muhammad Taqi Al Usmani feature as two prominent Shariah scholars from beyond the Middle East region who play key Shariah advisory roles in the region.

Malaysia's Dr Mohamed Daud sits on 22 boards in the Gulf Cooperation Council (GCC) while Muhammad Taqi has eight board positions, according to a recent study of Shariah scholars as at end-2008 in Bahrain, Dubai, Kuwait, Qatar, Saudi Arabia and Abu Dhabi.

The top 10 scholars, with 15 or more Shariah board positions, share 253 positions leading to slightly above 25 positions per scholar, concluded the study by research based strategy consultant Funds@Work AG. The analysis covered 131 companies from Bahrain, Dubai, Kuwait, Qatar, Saudi Arabia and Abu Dhabi with 498 Shariah board positions.

It noted that 121 scholars from 19 different countries (Bahrain, Dubai, Kuwait, Qatar, Saudi Arabia, UAE/Abu Dhabi, Malaysia, Sudan, Iran, Pakistan, Yemen, Jordan, Tunisia, Lebanon, Turkey, South Africa, Indonesia, and the UK) were identified based on legal documents and other information highlighting their involvement in Shariah boards of various service and product providers as well as industry bodies.

The selection process left 94 scholars on 467 board positions and it leads to an estimated number of five board positions per scholar. Disregarding all scholars with less then three actual board positions, the study found that this leaves 400 positions for 38 scholars, leading to 10.5 expected board positions per scholar. Looking at the top 20 scholars (six or more board positions) leaves 339 board positions, equaling 17 expected board positions per scholar.

The Top 10 scholars (15 or more positions) share 253 positions leading to 25.3 positions per scholar, it concluded. On distribution, the study said the numbers indicate that about 54 (68%) of all Shariah board positions throughout the GCC are shared by only 11 (21%) of the active scholars, if board positions of the top 10 (Top 20) are summed up.

Shaikh Nizam Mohammed Saleh Yaquby from Bahrain, Shaikh Dr Abdul Satar Abdul Karim Abu Ghuddah (Saudi Arabia) and Dr Mohammed Eid Elgari (Saudi Arabia) alone make up 50% of the positions of the Top 10, or 26%, of the total amount of board memberships in the GCC, it noted.
The other names that crop up are Dr Abdulaziz Khalifa Al-qassar from Kuwait, Sheikh Abdulla Sulaiman Al Manea from Saudi Arabia and Sheikh Dr Hussein Hamid Hassan from Dubai.

The study, entitled "Shariah Scholars in the GCC — A Network Analytic Perspective" was meant to shed light on the Shariah landscape and give insights into Shariah scholars' engagements in institutions in the GCC and beyond, the outfit said. It analysed existing documents to get insights into Shariah boards and their members as well as their links to institutions across the region.

By mapping existing relationships, it hoped to get a "solid overview of their involvement", it added. The research team noted that as corporate governance related topics will most likely play a more dominant role in the Shariah market in the future, especially in the GCC, it would like to highlight the structural situation in the current market in order to give industry participants unique insights into the existing web of relationships.

"Although we only focus on snapshots of information we are convinced that the enclosed information can be of help in getting a solid idea of the Shariah landscape in the GCC and beyond and help in formulating futuregGovernance standards to assist the industry to thrive to the next level of development," the study concluded.