INSPIRING THE FUTURE WITH WEALTH SUSTAINABILITY AND VALUE INNOVATION. HAJI MOHD NAZRI CHIK Assistant General Manager/ Head Shariah Division

Transcription

1 INSPIRING THE FUTURE WITH WEALTH SUSTAINABILITY AND VALUE INNOVATION HAJI MOHD NAZRI CHIK Assistant General Manager/ Head Shariah Division 1

2 1/ POTENTIAL OF ISLAMIC FINANCE "... the principles of Islamic Finance may present a possible cure for ailing markets" The Vatican in their official newsletter L'Osservatore Romano, March 2009 Get Together BankIslamFB 2

3 2/ ISLAMIC FINANCE VS ISLAMIC BANKING ECONOMY FINANCE BANKING Likewise conventional finance, Islamic finance deals with resource allocation, management, acquisition and investment. Islamic finance is built upon some distinctive and unique characteristics which are based on rules and principles underlined by Shariah. Get Together BankIslamFB 3

4 UK 3/ DEVELOPMENT OF ISLAMIC BANKING SO FAR Govt sets an objective to entrench London as a global gateway for Islamic Finance 5 FSA-approved Islamic banks and 2 Takaful operators California France Passed rules/regulations to support Islamic finance activities Established Islamic Finance Commission Key players in France such as BNP Paribas, Societe Generale and Union de Banques Arabes et Francaises have been involved in Islamic financial transactions over the last ten years. Dubai, UAE Fast emerging as financial centre through DIFC aggressive promotion efforts London France Saudi Arabia Sudan Singapore Dubai Bahrain Pakistan Indonesia Hong Kong Aims to become an Islamic finance hub Hang Seng Islamic China Index Fund in 2007 Shariah Advisory Council formed Malaysia Singapore Introduced tax neutrality for Islamic finance Aspiring to be centre for Islamic finance Issued SGD200 mil sukuk in 2009 and launched Shariah-compliant Sabana REIT Tokyo Hong Kong Australia Australia Islamic co-operative finance & mortgage established Australian Islamic wealth manager Crescent Wealth and HSBC1 have launched Australia s first Islamic cash management fund June 12 rapid expansion is reflected in more than 600 Islamic financial institutions operating in more than 75 countries in centers that are beyond Muslim jurisdiction. Total assets > USD1.8 trillion 4

5 4/ ISLAMIC BANKING JOURNEY IN MALAYSIA Instituting Foundation (Establishment of Enabling Infrastructure) Merely as an alternative to conventional banking Instituting Foundation Institutional Building, (Establishment Activity Generation of Enabling & Infrastructure) Market Vibrancy Merely as an (Deepening, alternative Creating to conventional Critical Mass banking & Liberalization) Ensuring greater access to Islamic finance Strategic Positioning & International Integration with Global Financial System 2006 onwards Becoming hub of international Islamic finance double digit growth of more than 20% 5

6 5/ MALAYSIAN JOURNEY : COMPREHENSIVE OFFERINGS Venture Capital/ Private Equity Wealth Mgmt Ancillary Services Banking Islamic Finance Money Market Debt Capital Market Equity Capital Market robust development of these components will enhance sustainability and resilience of the Islamic financial services industry Asset Mgmt REITS Takaful 6

7 6/ TRANSFORMATION OF ISLAMIC FINANCIAL LANDSCAPE Simple Products (e.g. Plain Vanilla) Monopoly & Basic Infrastructure Comprehensive & Sophisticated Products (e.g. Hybrid & Structured Products) Diversify Players & Comprehensive Infrastructure Window Full-Fledged Islamic Bank Alternative Banking & Specific Agenda National Agenda Traditional Market & Domestic/ Local Player Non-Traditional Market/ Cross Border, Global Player changing financial landscape has accelerated expansion of Islamic finance sector 7

8 7/ ISLAMIC FINANCE MATURITY CURVE Measure or success or profitability High Fast Growth Stiff Competition Focus on market share & innovation Saturation Consolidation Demand for greater differentiation Medium Low Early Start Focus on product design and positioning Customer Awareness Emerging Large number of new entrants Rapid growth in value of the industry Increased recognition and awareness Maturity Removal of incentives Islamic finance probably stands here; best time in terms of business development BUT most damaging when a crisis hits xx 8

9 8/ ISLAMIC BANKING IN MALAYSIA: MOVING FORWARD Opportunities Project/Infrastructure Financing Sukuk (ETP & NKEAs). Government incentives & competitive advantage (waiver on stamp duty etc) New Requirements for companies to be classified as Shariah Compliant Counter Internationalization of Islamic Finance Financial inclusion & micro financing Challenges Misconception about Islamic banking Global regulatory reforms (emphasis on strong capital and liquidity) Develop globally accepted Shariah based products Macro prudential measures Global economic conditions War for talents Shariah scholars and work forces Rising Cost to Income Ratio Especially for Small Islamic Banks Originating Department 9

10 9/ INNOVATION APPLICATION OF CONTRACTS 1. Musharakah for working capital, not only asset acquisition or project financing Bank to invest in the customer s property. The purchase value of the shares is the financing amount. 2. Ijarah for working capital, not only asset acquisition or project financing Subsequent arrangement is to use the engine of MM for property financing. Customer must own the property and is ready to sell it to the Bank for subsequent lease to him. The purchase price paid by the Bank is the financing amount. Other structure is similar to ordinary IMBT Shariah Division Pag e 10

11 9/ INNOVATION APPLICATION OF CONTRACTS 3. Ijarah for Services 4. Istisna to Finance Sale, Not Only to Finance Purchase An Istisna credit line may be created and the customer is to draw the line for each Istisna drawdown upon getting request from the buyer. Requires collaboration with service providers: Education financing with university and colleges. Credit enhancement only for approved buyer and guarantee from the customer on the payment performance of the buyer. Medical financing with hospitals and health centres. Travel, hajj and umrah financing with travel agencies. Product structure is similar to Murabahah for the Purchase Orderer (MPO) as the Bank purchases the services and leases / sells it to the customer on deferred payment basis. Shariah Division Pag e 11

12 THANK YOU The information contained in this presentation may be meaningful only with the oral presentation and is of the personal view of the presenter and does not necessarily represent an official opinion of Bank Islam Malaysia Berhad. For further information, please contact: HAJI MOHD NAZRI CHIK # Assistant General Manager, Shariah # Bank Islam Malaysia Berhad mohdnazric@bankislam.com.my # Direct Line: # Mobile: Muamalat