Malaysia

Bank Negara Malaysia opened up a wider door for Southeast Asian banks to add number of branches.

Hwang DBS Vickers Research said there is still room for Malaysian banks to consolidate after speculations that Alliance Financial’s major shareholders will sell their 29.1% stake surfaced.

Malaysia's Maybank Islamic and Indonesia's Bank Syariah Mandiri will establish cross border collaboration in all Islamic treasury and trade finance matters.

 Bank Muamalat Malaysia Bhd has allocated about RM56 million to renovate or relocate its 56 branches.

The lender seeks growth opportunities abroad as banking competition increases in Malaysia.

RHB maintains interest in M&A even after Maybank and CIMB dropped the plan.

Bank Islam expects to exceed the RM503 million profit growth recorded during the 18-month period ended Dec 31, 2010.

The decision to raise the Statutory Reserve Requirement by 100 basis points to 4.00 per cent effective July 16, is unlikely to have any visible impact on the credit growth of banks, according to research.

SME Bank is on target to disburse RM1.5 billion in loans by year-end.

Bank Islam Malaysia Bhd  plans to open 32 new branches by 2014 including in Sabah and Sarawak.

Bank Negara Malaysia has raised the Statutory Reserve Requirement ratio from 3.0 % to 4.0 %.

Sabah wants more foreign Islamic banks, especially from the Middle East, to invest in the state, said Chief Minister, Datuk Seri Musa Aman.

An RHB official denied last week report saying that it is not in any discussion with CIMB on any potential takeover offer.

Should the deal take place, it would generate a combined market value of $28.5bn.

Remarkable growth Between 2006 and 2010, Islamic Finance has seen a 19 per cent CAGR (compound annual growth rate) - bringing it to an estimated global value of USD 1 trillion. Future growth predictions are even more remarkable, with some forecasts suggesting Islamic Finance could continue to grow at more than four times the rate of conventional finance – and forecasting it to reach USD 5 trillion in value by 2016. Whilst approximately 80 per cent of this business is in the Middle East, Asia represents a significant market with Malaysia having a sizable 12 per cent market share and Indonesia witnessing strong growth (forecast to grow by 55 per cent in 2011). The Malaysian Islamic financial sector is seen as one of the most progressive and attractive in the world. Asia driving growth One of the main drivers for the rapid growth in Islamic Finance is an increasing Muslim population. As at 2009 the global Muslim population stood at 1.6 billion (October 2009 study by the Pew Research Center report of Mapping the Global Muslim Population). The majority – 62 per cent - is in Asia. This population is increasingly demanding Sharia compliant banking products. Global significance Perhaps because of this strong growth, there is increasing awareness of Islamic Finance in the non-Muslim world. · Governments are increasingly supportive with tax laws and regulations accommodating Islamic Finance (e.g. Australia, France and the UK) · In 2009, General Electric issued its first Sukuk, as Western companies are issuing the Islamic equivalent of bonds · The Vatican issued a statement of support in March 2009, commenting that the ethical principles on which Islamic Finance is based may bring banks closer to their clients and to the true spirit which should underpin every financial service · In 2010, the US White House appointed a Sharia finance specialist · Global financial institutions are increasingly active through the opening of Islamic Windows There are risks… but there is a solution There is much talk within the market about standards. This usually focuses on differences in interpretation of Sharia when related to finance, and the shortage of suitably qualified Sharia scholars to take up board positions at financial institutions. However, there is another aspect to standards that is crucial for a young and rapidly growing market: the standardization and automation of business processes. As the volume of Islamic financial transactions increases, so too do the risks associated with manual processing.

The Issue of Choice In February 2011, KPMG last wrote about the issues regarding the infrastructure and regulation of Islamic banking in Malaysia. In continuing this series on this topic, we will move on to examine Islamic banking’s challenges in differentiating itself from conventional banking in the already crowded market and where the opportunities exist in Malaysia for it to become a truly innovative market leader in certain sectors. Islamic finance at its heart offers a system of finance for both individuals and companies that are based on principles of Shariah law.