DUBAI: In an effort to bolster non-ringgit denominated Islamic banking, Bank Negara Malaysia may issue more licences to foreign banks that plan to conduct Islamic banking in multiple currencies.
Currently, almost all of Malaysia's Islamic banking activities, carried out by both local and international banks, use the ringgit. Bank Negara Malaysia Deputy Governor (banking policies) Datuk Mohd Razif Abd Kadir said the central bank wants to bring in new players by issuing licences to banks that plan to do Islamic banking in all types of currencies.
"These banks will receive special tax incentives and they can either be local or foreign. They can also set up operations anywhere in the country and not just in offshore centres like Labuan," Mohd Razif told Business Times over the weekend. He was met on the sidelines of a seminar aimed at attracting United Arab Emirates investments into Malaysia, organised by the Kuala Lumpur Business Club.
Mohd Razif said the initiative is a part of the government's proposal to set up the Malaysia International Islamic Financial Centre, which will offer offshore Islamic financial products and services from anywhere in Malaysia.
"Much of the Islamic banking products, such as sukuk (Islamic bonds), project financing, takaful (Islamic insurance), fund management and others, are in ringgit. To become a hub to the region, we must create Islamic-based instruments using all types of currencies such as the Hong Kong and Singapore dollars," he said.
Mohd Razif said Malaysian Islamic banking assets account for 13 per cent, or RM108 billion of the country's total banking assets and half of the Islamic financial market comprises the ringgit denominated sukuk or Islamic corporate bonds worth RM125 billion. Bernama reports: Malaysia's aspiration to be a reputable international Islamic financial centre should not be seen as a threat to Dubai's aspiration of itself becoming one. The Financial Ambassador for the Malaysia International Islamic Financial Centre, Raja Nazrin Shah, said the market for Islamic products is still in its infancy and should not be limited to a few financial institutions and products.
"If we have only a limited number of financial institutions and products - whether in Kuala Lumpur or Dubai - we risk affecting the development of the infant. "By allowing the market to grow and by allowing issuers and investors choice of quality, services and products, both countries will in fact be working in complementary ways towards a common goal," the Raja Muda of Perak said in his keynote address at an investment conference "Why Invest in Malaysia?" here.
The conference is part of the programme of a mission to Dubai and Abu Dhabi organised by the Kuala Lumpur Business Club.