Gateway to Asia pwc Malaysia, international Islamic finance hub PricewaterhouseCoopers / 1

Gateway to Asia
Malaysia, international Islamic finance hub
pwc
PricewaterhouseCoopers / 1
In this more challenging global economic
and financial environment, Islamic finance
has remained dynamic with a steady pace of
innovation and fast growing as its expansion
gains further momentum. This has demonstrated
not only its viability and resilience but also its
ability to remain competitive.
Tan Sri Dr. Zeti Akhtar Aziz
Governor, Bank Negara Malaysia
2 / Gateway to Asia: Malaysia, international Islamic finance hub
Foreword
Over the last decade, Malaysia
has made significant strides to
progress as a major Islamic finance
hub within the global sphere which
includes a fast growing community
of Islamic banks and takaful
operators.
The development of Islamic finance
in Malaysia has been supported
by firmly established financial
infrastructure, institutions, regulatory
frameworks and guidelines.
Benchmarked against other Islamic
finance centres in the world,
Malaysia has the:
• Largest Islamic capital market for
both sukuk and Islamic equity
• Second largest Islamic unit trust
(mutual fund) and takaful market
• Second largest Islamic finance
education provider
• Third largest Islamic banking
market
Among Malaysia’s recent key
initiatives is to further liberalise its
financial services market with the
issuance of nine new licences to
foreigners, marking a major milestone
in the opening of its banking and
insurance sectors. Four of these nine
new licences are linked to Islamic
banks and takaful and this supports
Malaysia’s long-term vision to be a
major international Islamic financial
services hub.
Worldwide, Islamic finance continues
to be a key alternative and the fastest
growing finance sector as awareness
of its ethical attributes grows.
We hope you find this publication
insightful and welcome discussions
on Islamic finance matters and
opportunities in Malaysia and beyond.
Mohammad Faiz Azmi
Global Islamic Finance leader
May 2010
PricewaterhouseCoopers / 3
DISCLAIMER
ACKNOWLEDGMENT
We would like to
acknowledge Bank Negara
Malaysia, Securities
Commission Malaysia,
Malaysia International
Islamic Financial Centre
and other organisations
for the use of information
extracted from their
publications and websites.
This publication has been
prepared for general guidance
on matters of interest only, and
does not constitute professional
advice. You should not act
upon the information contained
in this publication without
obtaining specific professional
advice. No representation or
warranty (express or implied)
is given as to the accuracy or
completeness of the information
contained in this publication,
and, to the extent permitted by
law, PricewaterhouseCoopers
in Malaysia, its members,
employees and agents do not
accept or assume any liability,
responsibility or duty of care
for any consequences of you or
anyone else acting, or refraining to
act, in reliance on the information
contained in this publication or for
any decision based on it.
4 / Gateway to Asia: Malaysia, international Islamic finance hub
© 2010 PricewaterhouseCoopers.
All rights reserved.
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PricewaterhouseCoopers / 5
Malaysia:
Islamic finance
milestones
Islamic finance institutions
1996
1984
Securities
Commission
Malaysia (SC)
established
Shariah Advisory
Council
Enactment of
Takaful Act
1983
First takaful
operator
established
1993
Enactment
of Islamic
Banking Act
1969
Established Islamic
savings institution,
Pilgrim Fund Board
or Tabung Haji
1970
Conventional
banks
allowed to
set up Islamic
banking
windows
First Islamic
bank
established
1980
1997
First sukuk
based
on Bai’
Bithaman-Ajil
Founding member
and host country
of the Islamic
Financial Services
Board (IFSB)
2000
1990
1990
2002
Bank Negara
Malaysia (BNM),
the central bank,
established the
National Shariah
Advisory Council
1999
Launch of
Kuala Lumpur
Shariah Index
(KLSI)
2001 - 2002
World’s first global
corporate sukuk
and first Ijarah
corporate sukuk
World’s first global
sovereign sukuk
Islamic finance products
1
2
International Finance Corporation is a private arm of the World Bank
Bursa Malaysia operates the national stock and futures exchanges
6 / Gateway to Asia: Malaysia, international Islamic finance hub
2010
BNM to issue
two new
licences for
both Islamic
banking and
takaful
2005
Banks with Islamic
banking windows
allowed to convert
to Islamic bank
Issuance of three
foreign Islamic
bank licences to
Kuwait Finance
House, Al Rajhi
Bank and Asian
Finance House
Bank
2006
Establishment
of the Malaysia
International Islamic
Financial Centre
(MIFC) initiative
Establishment of
the International
Centre for
Education in Islamic
Finance (INCEIF)
2008
Establishment
of the
International
Shari’ah
Research
Academy
for Islamic
Finance (ISRA)
2009
Foreigners
allowed to
take up to
70% stake in
Islamic banks
and takaful
operators, up
from 49%
New blueprint
for financial
services
sector
Second
capital market
master plan
2010
2003 2004
First Islamic
asset-backed
securities (ABS)
Issuance
of Ringgit
sukuk by
supranational
body,
International
Finance
Corporation1
2005
First Musharakah
sukuk ABS
World’s first
Islamic residential
mortgage-backed
securities
First jurisdiction in
the world to put
in place Shariahcompliant deposit
insurance scheme
2006
2007
First Islamic REIT
World’s first hybrid
sukuk
World’s
first Islamic
exchangeable
bond
First sukuk
Musharakah
to use shares
as underlying
investment
World’s first
international
subordinated
sukuk
Launch of first
Asian Islamic
exchange traded
fund (ETF)
2009
World’s largest
international
sukuk by
Petronas, since
the US$1.5 billion
Dubai port issue
in 2007
First Shariahbased commodity
trading platform
on Bursa
Malaysia2
World’s largest
corporate sukuk
issuance by
Malaysia-based
Binariang GSM
PricewaterhouseCoopers / 7
11
17
25
29
Overview of Malaysia
Malaysia, international Islamic finance hub
Market liberalisation
Islamic finance: Market segments
•
•
•
•
•
61
67
75
80
Islamic banking
Takaful
Islamic fund management
Sukuk
Equity
Shariah developments
Tax neutrality and incentives
PwC Islamic finance services
References: Appendices
Content
8 / Gateway to Asia: Malaysia, international Islamic finance hub
PricewaterhouseCoopers / 9
10 / Gateway to Asia: Malaysia, international Islamic finance hub
OVERVIEW
OF MALAYSIA
Vibrant Muslim nation, centrally located among dynamic economies of Asia
Among emerging countries, Malaysia is a key player in the
manufacturing and services industry
An ideal match between quality and costs
PricewaterhouseCoopers / 11
Overview of Malaysia
Vibrant Muslim nation,
centrally located among
dynamic economies of Asia
27.3
million
population
Total area
329,750 sq km
Capital
Kuala Lumpur
Language
Malay, English, Mandarin and
other Chinese dialects, Indian
dialects
Currency
Exchange rate (as at March 2010):
US$1 = RM3.31 (Ringgit Malaysia)
Government
Constitutional monarchy
Administrative divisions
13 states and three federal
territories (FT)
Over the past four decades, Malaysia has
transformed itself from an economy that is
principally commodities-dependent into a major
world source for electronics and computer
parts. A resource-rich country, Malaysia is the
world’s largest producer of palm oil and tropical
hardwoods, and a net exporter of crude oil.
Currently, the population of Malaysia is 27.3
million with the majority being Muslims. Malaysia
is perceived as a liberal Muslim nation with a long
history of being harmoniously multi-cultural.
With its diversified economic base and strategic
central location in between China, Indonesia and
India which are the emerging and high growth
economies of the world, Malaysia - a beneficiary
of Asian trade dynamism - is poised for strong
and sustainable economic growth.
Despite the global financial crisis, Malaysia’s
open economy has shown surprising resilience.
In 2009, the economy contracted by just 1.7%,
with fourth quarter GDP registering a buoyant
4.5% which portends to an economic recovery
of 4%-5% growth in 2010. This encouraging
growth is supported by strong external growth
and modest domestic demand. Domestic demand
was also assisted by the government’s RM67
billion (US$19.6 billion) fiscal spending.
12 / Gateway to Asia: Malaysia, international Islamic finance hub
Overview of Malaysia
Among emerging countries,
Malaysia is a key player
in the manufacturing and
services industry
Fast growing
to be a key
regional hub
of MNCs
Malaysia is increasingly a choice
location for foreign investors
and multinationals in view of an
attractive set of factors, including
its:
of setting up business operations in
Malaysia is also substantially lower
than in Hong Kong or Singapore.
Besides regional operational
headquarters, Malaysia is also
encouraging companies to set up
international procurement centres,
regional distribution centres,
representative offices and regional
offices.
• stable, yet vibrant economy;
• well-educated, skilled and
multilingual workforce;
• Good civil and ICT infrastructure;
• Competitive cost of doing
business; and
• strong government support in
terms of fiscal and non-fiscal
incentives.
There are over 2,600 approved
regional establishments in Malaysia.
Major multinational companies
with operational headquarters in
Malaysia include General Electric,
Dow Chemicals, Du Pont, IBM,
Intel, Kellogs, Sharp Electronics,
Nippon Electric Glass, BASf,
Siemens, Bayer, Ansell, IBA Health,
Michelin, Norvatis and Volvo.
While Malaysia’s costs are higher
compared to other emerging
countries like Vietnam, when
balancing Malaysia’s overall country
package including political and
social stability, and its legal and
accounting framework, Malaysia
offers a highly attractive deal for
foreign investors. Further, the cost
Chart 1: PwC EM20 Index, investment attractiveness of various emerging markets from risk and reward angle
Manufacturing index
Country
Services index
Rank
2008
Index
Country
9
83
92
2
86
13
4
84
5
83
Rank
2009
Index
Chile
1
95
Bulgaria
2
Malaysia
3
China
Poland
Rank
2009
Index
Rank
2008
Index
Slovakia
1
95
6
91
93
Chile
2
92
2
95
81
Poland
3
88
1
95
14
81
Bulgaria
4
83
5
93
15
81
Malaysia
5
81
9
87
EM = Emerging Market
Source: PwC EM20 Index 2009 Interim Update
PricewaterhouseCoopers / 13
Overview of Malaysia
An ideal match between
quality and costs
Chart 2: Global hub for offshoring, 2009
Average of people skills and availability,
and business environment
2.5
United
Kingdom
Germany
France
United States
Canada
Singapore
Ireland
2.0
Australia
India
Spain
New Zeland
Israel
China
Brazil
Malaysia
Estonia
Chile
Czech
UAE
Mexico
Hungary
Republic
Thailand
Lithuanja
Poland
Bulgarja
Egypt
Latvia
Slovakia
Mauritius
Romania
Indonesia
Jordan
Turkey
Argentina
Philippines
South Russia Uruguay
Tunisia
Vietnam
Sri Lanka
Africa
Jamaica
Morocco
Costa
Pakistan
Ghana
Panama
Senegal
Rica
Portugal
1.5
1.0
Ukraine
While there is often an inverse
relationship between costs and
business environment and people
skills, Malaysia is an ideal match
between quality and costs.
Malaysia was ranked third in A.T.
Kearney’s 2009 Global Services
Location Index, behind India and
China.
0.5
0.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Financial (cost) attractiveness
Source: The 2009 A.T. Kearney Global Services Location Index
Chart 3: Global Competitiveness Index score of selected Asian countries, 2009 - 2010
The Global Competitiveness Index
(GCI) ranked Malaysia no. 24 out of
133 countries, ahead of China, India,
Indonesia, Thailand and Vietnam.
Cambodia
Philippines
Vietnam
Indonesia
India
Thailand
Brunei
China
Malaysia
Korea, Rep.
Taiwan, China
Hong Kong
Japan
Singapore
3
3.5
4
4.5
5
5.5
Source: World Economic Forum, The Global Competitiveness Report 2009 – 2010
14 / Gateway to Asia: Malaysia, international Islamic finance hub
6
The GCI is a weighted average
measurement of 12 competitive
components (competitive pillars)
i.e. institutions, infrastructure,
macroeconomic stability, health and
primary education, higher education
and training, goods market
efficiency, labour market efficiency,
financial market sophistication,
technological readiness, market
size, business sophistication and
innovation.
PricewaterhouseCoopers / 15
16 / Gateway to Asia: Malaysia, international Islamic finance hub
MALAYSIA,
INTERNATIONAL
ISLAMIC
FINANCE HUB
Increasingly recognised as having the most developed Islamic finance market
At the centre of large Muslim nations and high growth Asian markets
PricewaterhouseCoopers / 17
Malaysia, international Islamic finance hub
Increasingly recognised as
having the most developed
Islamic market
Malaysia’s Islamic finance
advantages
Globally, Islamic finance has been
steadily making inroads into the
mainstream financial market,
growing at around 20%-30%1
on average annually over the
last 10 years. Rising awareness,
government initiatives and oil
wealth have turned Islamic finance
into an industry with US$1 trillion
(RM3.3 trillion) in assets globally.
Over the next eight to 10 years, it
is expected to quadruple to US$4
trillion2.
Being one of the “big 4” global
centres3 in Islamic finance
(refer Chart 4), Malaysia is well
positioned to take advantage of
the market opportunities. The
following sections will discuss
how Malaysia is developing its
Islamic finance industry and
presence regionally and globally.
Sound regulatory framework
Product innovation
Over the last 30 years, the
government and central bank, Bank
Negara Malaysia (BNM), have firmly
established supporting financial
infrastructure, institutions, regulatory
frameworks and guidelines.
Malaysia’s increasingly mature
and liquid Islamic finance market
provides ample opportunities
for players to learn, experiment
and test new products and best
practices. Its innovation footprints
in Islamic finance include global
corporate and sovereign sukuks.
Islamic exchangeable bonds and
Islamic Real Estate Investment
Trusts (REITs).
These initiatives have provided
transparency and protection
of property rights for investors
and other stakeholders, which
are comparable to international
standards in areas such as financial
reporting, corporate governance
and common law.
Tax neutrality
Recognising the need for Islamic
finance to be backed by underlying
assets, Malaysia was among the
first country to accord tax neutrality
to Islamic finance instruments and
transactions to reduce the cost
of transferring assets in Islamic
finance. This measure has promoted
a level playing field between
conventional and Islamic financial
products.
Islamic financial institutions in
Malaysia also offer a broad range
of Islamic finance products,
which accepts all the four Shariah
schools of thought (refer Chart
5). This has enabled Gulf Islamic
banks like Kuwait Finance House
and Al Rajhi Bank to offer similar
Islamic finance products and
services as in their home country.
1. Saudi Arabian Monetary Agency Governor, Mohammed al-Jasser, as cited in Bloomberg, 2009
2. Praesidium and the Dubai International Financial Centre Authority, as cited in Maktoob Business, 2009
3. Arthur D Little, Islamic Finance Comes of Age, 2009 (other key Islamic financial centres include Saudi
Arabia, United Arab Emirates and Kuwait)
18 / Gateway to Asia: Malaysia, international Islamic finance hub
Chart 4: Malaysia’s ranking in global Islamic finance, 2009
Sukuk market
Equity market
Fund management
Rank
Countries
Rank
Countries
Rank
Countries
1
Malaysia
1
Malaysia
1
Malaysia
2
UAE
2
Indonesia
2
Saudi Arabia
3
Saudi Arabia
3
UAE
3
Kuwait
4
Indonesia
4
Saudi Arabia
4
Cayman Islands
5
Bahrain
5
Kuwait
5
Bahrain
Takaful
Rank
Islamic banking
Countries
Rank
Countries
1
Iran
1
Iran
2
Malaysia
2
Saudi Arabia
3
UAE
3
Malaysia
4
Saudi Arabia
4
UAE
5
Bahrain
5
Kuwait
Source: Various sources (please refer to charts 10, 20, 32, 40 and 47 for further details)
Chart 5: The four Islamic schools of thought accepted in Malaysia’s Islamic finance
Hanafi
Maliki
Hanafi is considered
the oldest and most
liberal.
This school appeals
to “common utility...
the idea of the
common good”.
Shafii
Considered as the
easiest school of
thought.
Hanbali
It is considered the
most conservative
in terms of social
and personal rules.
Source: Various sources
PricewaterhouseCoopers / 19
Large investor pool
Having one of the most
developed sukuk market in the
world (accounting for 62% of
total global sukuk outstanding
as at end June 2009), Malaysia
has a ready supply of Shariah
investors for Asian governments
and companies to tap into to
raise funds.
The depth of Malaysia’s
sukuk market also provides
opportunities for global Shariah
investors to leverage Malaysia
as a one-stop centre to invest
in and trade regional sukuk
instruments, adding further
liquidity to regional bonds which
are listed on Malaysia’s stock
exchange, Bursa Malaysia, and
Labuan International Financial
Exchange.
Gateway to Asia and Middle
East markets
Asia-Pacific is rapidly evolving
to be the centre of finance
activities as global economic
growth and finance shift from
Western countries to the Asian
economies over this decade.
The region is expected to grow
twice as fast as US and Western
Europe over the next five years.
The Asian Development Bank
estimates that Asia will need
1
US$8.3 trillion (RM27.5 trillion)
infrastructure
investment over 2010-2020 to
support its growth.
Malaysia, located in the middle
of Asia Pacific and the Middle
East, can play a central role
to facilitate cross-border flow
of Islamic finance into the
region, which has attracted
attention of investors from Gulf
Cooperation Council (GCC)
countries. According to the
Secretary General of the GCC
Chambers, Abdulraheem Naqi,
GCC countries are looking
more towards China, India and
Malaysia to make investments1.
Middle East economic and
cultural links
Apart from sharing similar
religious background with
Middle East countries, Malaysia
has good economic and
investment links with GCC
countries, as well as, being
a major tourist destination
for Middle East countries. In
October 2009, the government’s
wholly-owned 1Malaysia
Development Bhd teamed up
with Saudi Arabia’s PetroSaudi
International Ltd to establish
a US$2.5 billion joint venture
company to boost investments
from the Middle East into the
country.
Chart 6: Regional 5-year GDP growth forecast
Over the next five years, Asia to grow twice as
fast as US and Western Europe
%
5
2011
2012
2013
2014
4
3
2
1
0
US
Western Europe
Asia*
* Including Australasia
Source: EIU ViewsWire, January 2010
Asia’s combined
GDP will surpass
Europe’s in 2010,
highlighting the
region’s growing
economic clout in
the aftermath of the
global crisis
Source: World Economic Forum, January 2010
Business Times (Malaysia) , “GCC countries keen to invest in Malaysia”, February 2010
20 / Gateway to Asia: Malaysia, international Islamic finance hub
2010
Malaysia, international Islamic finance hub
At the centre of large Muslim nations
and high growth Asian markets
Global Islamic finance to grow to around
US$1.6 trillion by 20121, from US$1 trillion in 2009
Chart 7: Economic growth and demographics of Asian regions
Average annual GDP
growth forecast 2010-2014
6% - 10%
3% - 6%
0% - 3%
N/A
China
1.3 bln people
26.8 mln Muslims
GDP: US$4.6 trl
East Asia (exclude China)
224.3 mln people
1.9 mln Muslims
GDP: US$6.3 trl
2 hours
Middle East
202.1 mln people
185.8 mln Muslim
GDP: US$1.8 trl
Malaysia
South Asia
1.6 bln people
459.9 mln Muslim
GDP: US$1.5 trl
4 hours
6 hours
8 hours
South East Asia
592.5 mln people
246.7 mln Muslim
GDP: US$1.5 trl
Source: IMF World Economic Outlook Database, CIA World Factbook and EIU ViewsWire
1
Oliver Wyman as cited by Reuters, April 2009
PricewaterhouseCoopers / 21
Global and regional centres for Islamic
finance institutions
Infrastructure and location factors have
driven a number of international banks to
establish Malaysia as centre of excellence
for their Islamic finance operations. Standard
Chartered, for example, has made Malaysia
the base country for the bank’s Islamic finance
franchise, product offering and commitment.
HSBC Amanah has also made Malaysia the
regional centre to develop best practices and
new markets across Asia-Pacific.
Other Islamic finance players which are
positioning Malaysia as a regional hub or a
platform to further expand into Asia include
Kuwait Finance House, Al Rajhi Bank, OCBC
Islamic Bank and the National Bank of Abu
Dhabi, which applied for a banking licence to
operate in Malaysia in February 2010.
There are also 15 other foreign financial
institutions operating in Malaysia involved in a
variety of Islamic finance services from Islamic
banking, takaful to Islamic fund management.
The further liberalisation of Malaysia’s Islamic
finance industry to foreign participants
will attract greater international Islamic
finance presence, strengthening Malaysia’s
international Islamic finance hub position.
Reasons international financial
institutions locate their global and
regional Islamic finance centres in
Malaysia:
Infrastructure
• Systematic and progressive approach to
Islamic finance by Malaysian regulators and
government
• Malaysia is an important promoter of
Islamic finance and the benchmark of
Islamic finance
• Depth of expertise in Islamic finance
structuring and product innovation
• Adoption of latest technology including
online banking, an ideal hub to allow the
bank to work with different jurisdictions,
opening the way for market penetration
across various countries in the region
• Supportive legal and regulatory framework,
but with no compromise and dilution of risk
management in terms of Basel II provisions
Markets
• Asia has the potential to grow in terms
of Islamic finance especially in sukuk
issuances
• Strong local market demand
• Strong local investor base including
the Employees Provident Fund (EPF),
Tabung Haji (Pilgrims Management Fund),
Permodalan Nasional Bhd (Malaysia’s
leading fund management company),
insurance and takaful companies and
Khazanah Nasional Bhd (Malaysia’s
sovereign wealth fund)
Source: Arab News, November 2009
22 / Gateway to Asia: Malaysia, international Islamic finance hub
Chart 8: Malaysia’s window of Islamic finance expansion opportunities
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PricewaterhouseCoopers / 23
24 / Gateway to Asia: Malaysia, international Islamic finance hub
MARKET
LIBERALISATION
Market liberalisation accelerates progress towards global leadership in Islamic finance
Four new Islamic mega banks and takaful licences
PricewaterhouseCoopers / 25
Market liberalisation
Market liberalisation accelerates
progress towards global leadership in
Islamic finance
2009 has been a landmark year for Malaysia’s services
sector. Barely a week after the Malaysian government
announced the liberalisation of the 27 services sub-sectors
such as in the areas of health and social, tourism-related
and business services (regional distribution centres), a
number of bold measures were announced on 29 April
2009 to further liberalise Malaysia’s financial services
sector.
The Malaysian government’s unprecedented
announcement to issue nine new licences to foreigners
marks a major milestone in the opening of the Malaysian
banking and insurance sectors. This significant
liberalisation reinforces Malaysia’s commitment to open up
its market to foreign players as part of the implementation
of its 10-year Financial Sector Master Plan (FSMP).
With four of the nine new licences linked to Islamic
banking and takaful, it affirms Malaysia’s long-term vision
to be a major international Islamic financial services hub.
In addition, the relaxation of the foreign equity limit for
insurance companies, local Islamic banks and takaful
operators is likely to spur further rationalisation among
domestic players in the industry, particularly in the
insurance sector.
The entry of new foreign players will further catalyse
changes in the domestic banking and insurance
landscape, and raise the bar for higher standards in
product innovation and service.
26 / Gateway to Asia: Malaysia, international Islamic finance hub
A total of nine new financial
services licences will be
issued to foreign participants:
• Five commercial banks
- Three world-class banks
- Two specialist banks
• Two mega Islamic banks
• Two family takaful
Market liberalisation and prospects
Four new Islamic mega banks
and takaful licences
Promoting growth of
mega Islamic banks
and takaful
Among the market liberalisation
objectives for the financial
services sector is to develop
mega Islamic banks, with
paid-up capital of at least US$1
billion (RM3.3 billion), that are of
world-class standards to further
enhance Malaysia’s leadership
in Islamic finance.
In addition, Malaysia’s
central bank, BNM, aims to
increase market competition
by liberalising foreign entry
into domestic Islamic banking
and takaful markets to drive
financial groups to up their
scale and capacity, increase
market penetration and expand
regionally and become regional
champions of Islamic finance.
The initiative will also help
further develop the country’s
financial sector and capital
market as well as spur private
investments and economic
growth in the country.
Chart 9: Financial services market liberalisation measures
1. Issuance of new Islamic finance licences
•
•
Up to two new mega Islamic banking licences
will be offered to foreign players to establish new Islamic banks with paidup capital of at least US$1 billion (RM3.3 billion)
Up to two new family takaful licences
will be granted to players that can offer significant value proposition to spur
the development of the takaful industry
Pre-requisite
• Applicant must be reputable regulated institutions or a shareholder of a
reputable regulated institution
• Applicant must demonstrate that they have the necessary expertise and
resources that can tap the global Islamic financial market and contribute to
reinforcing Malaysia’s position as an international Islamic financial hub
2. Increase in foreign equity limits
•
•
Up to 70% foreign equity limit in domestic Islamic bank and takaful operator
The acquired Islamic bank will be required to maintain a paid-up capital of
at least US$1 billion (RM3.3 billion)
This allows existing domestic players that wish to scale up their operations and
expand into global markets greater flexibility to enter into strategic partnerships
with foreign players.
Pre-requisite: Similar to new Islamic finance licence
3. Operational flexibilities
•
•
•
•
Mega Islamic banks will be allowed to operate with no branching
restrictions
Takaful operators are allowed to establish branches nationwide without
restriction
No restriction on takaful operators to enter into bancatakaful
(bancassurance) arrangements with banking institutions
Greater flexibility to employ specialist expatriates who have expertise to
contribute to the development of the financial system in Malaysia
Source: www.bnm.gov.my
PricewaterhouseCoopers / 27
28 / Gateway to Asia: Malaysia, international Islamic finance hub
ISLAMIC
FINANCE:
MARKET
SEGMENTS
Islamic banking: Growing exponentially
Takaful: Untapped, small but fast growing
Islamic fund management: Sizeable, fast growing and comparable returns
Sukuk: Largest, active and most developed in the world
Equity: Large, diversified and recovering
PricewaterhouseCoopers / 29
Islamic finance: Market segments
Islamic banking:
Growing exponentially
Malaysia’s position
As a strong proponent of Islamic
finance, Malaysia is now one
of the world’s top three Islamic
banking markets with assets
totalling US$70.6 billion (RM233.7
billion) in 2009. Malaysia’s Islaimc
banking market is poised for
greater growth with the global
Islamic finance industry growing
between 15% and 20% annually
over the next eight to 10 years to
more than US$4 trillion1 (RM13.2
trillion), from around US$1 trillion
(RM3.3 trillion) in 2009.
Malaysia’s vibrant Islamic banking
industry is attributed to the strong
government and regulatory
support, its central bank’s (BNM)
active engagement with banks
to establish supporting financial
infrastructure and institutions as
well as its flexible and holistic
regulatory frameworks and
guidelines that facilitate the
sector’s growth.
Chart 10: Share of global Islamic banking assets in 2009
Saudi Arabia 16%
Malaysia 10%
UAE 10%
Kuwait 8%
Iran 36%
Bahrain 6%
Qatar 3%
UK 2%
Turkey 2%
Others 7%
Source: The Banker Top 500 Islamic Institutions, November 2009
Chart 11: Top five Malaysian Islamic banking institutions in 2009
Global rank
Name
Total assets
US$ mln
14
Bank Rakyat
13,081.0
18
Maybank Islamic Bhd
10,666.6
23
Bank Islam Malaysia Bhd
31
CIMB Islamic Bank Bhd
5,847.7
35
Public Bank Islamic Bhd
5,206.7
Source: The Banker Top 500 Islamic Institutions, November 2009
1
7,459.9
Praesidium and the Dubai International Financial Centre Authority, as cited in Maktoob Business, July 2009
30 / Gateway to Asia: Malaysia, international Islamic finance hub
Size & growth
Malaysia’s Islamic banking
industry has shown significant
growth over the last five years,
with assets doubling from
US$33.8 billion (RM111.8
billion) at end 2005 to US$70.6
billion (RM233.7 billion) at end
2009. There is ample liquidity
and financing capacity among
Malaysian Islamic banking
institutions, with financing to
deposits ratio of 1.0:1.4.
BNM targets the Islamic banking
industry to constitute 20% of the
overall banking assets by 2010,
with Islamic banking share of total
banking system assets standing
at 16% in 2009, which provides
further growth avenue.
Chart 12: Total assets, financing and deposits of Malaysian Islamic banking institutions
Total assets
Total financing
Total deposits
80
70
5-yr CAGR1
2005 - 2009
60
50
20%
40
Assets
30
18%
20
Financing
21%
10
Deposits
0
2005
1
2006
2007
2008
2009
CAGR - Compound annual growth rate
Source: Bank Negara Malaysia (BNM) Monthly Statistical Bulletin, December 2009
Chart 13: Market share of Islamic banking in Malaysia in 2009
Islamic banking
16%
Islamic banking
17%
Islamic banking
18%
Assets
Financing
Deposits
Conventional
banking
84%
Conventional
banking
83%
Conventional
banking
82%
Note: Excludes development financial institutions
Source: BNM Monthly Statistical Bulletin, December 2009
PricewaterhouseCoopers / 31
No. of players
Chart 14: Number of local and foreign players in Malaysia in 2009
Nine out of The Banker’s top 50
Islamic financial institutions in
2009 are from Malaysia. There
is also significant international
financial presence in the local
market from both GCC countries
and global banks like HSBC,
Standard Chartered
and Deutsche Bank.
Islamic banks
Local
Foreign
11
6
Banks participating in Islamic Banking
Scheme1
3
International Islamic banks
2
Total
11
11
2
New Islamic banking licences to be issued
2
Malaysia is expected to garner
further interest from global
players with the liberalisation
of the Malaysia Islamic finance
industry, as discussed earlier in
Chapter 3 (Market liberalisation
and prospects).
Product distribution
The bulk of Malaysia’s Islamic
banking financing caters to the
retail and household segment,
which accounts for 58% of total
financing extended. Household
loans are largely for the purchase
of passenger cars (29%) and
residential property (18%).
1
2
Excluding investment banks and development financial institutions (DFIs)
Announcement to be made by end of first half of 2010
Source: www.bnm.gov.my
Chart 15: Major Islamic
financing concepts
Bai’
Bithaman
Ajil
32%
Chart 16: Major Islamic
financing purposes
Residential property
18%
Murabahah
17%
Working
capital
25%
Ijarah 3%
Personal use
11%
Securities 5%
Others
18%
Ijarah Thumma Al-Bai
30%
Non-resident
property
4%
Others* 7%
Transport vehicles
30%
* Others include construction, other fixed assets, credit card and consumer durables
Source: BNM Monthly Statistical Bulletin, December 2009
32 / Gateway to Asia: Malaysia, international Islamic finance hub
With nascent global economic
recovery and encouraging bouyant
growth in Asia, the Malaysian
Islamic banking system is expected
to remain firm, given the excess
liquidity in the banking system, low
non-performing loans and strong
solvency level with sufficiently high
level of financial buffers.
Pre-tax profit
Return* (%)
700
35
600
30
500
25
400
20
300
15
200
10
100
5
0
2005
2006
2007
2008
Return (%)
Despite challenging global and
local economic environment,
the Malaysian Islamic banking
industry reported a surge in
profit and return1 in 2009 due to
a 43% increase in net financing
income. The rise was attributed
to a considerable drop in cost of
financing while maintaining a fixed
rate on its financing portfolio. The
benchmark financing rate, BNM’s
overnight policy rate (OPR), was
reduced by 175 basis points in
2009 to 2.0%.
Chart 17: Islamic banking institutions’ pre-tax profit and return1
US$ mln
Profitability & solvency
0
2009
Source: BNM Financial Stability & Payment Systems Report 2009
Chart 18: Islamic banking institutions’ net non-performing
financing* ratio and risk-weighted capital ratio
20
Risk-weighted capital ratio
15
10
5
Net non-performing financing ratio
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Dec-07
Sep-07
Jun-07
Mar-07
Dec-06
0
* 3-month
Source: BNM Monthly Statistical Bulletin, December 2009
1
Return = pre-tax profit over average shareholders’ funds
PricewaterhouseCoopers / 33
Market entry
Chart 19: Market entry procedures for Islamic banking in Malaysia
Market type
Domestic market
International market
Market entry
Acquire/alliance with existing players
International Islamic banking
Foreign equity
ownership
Minimum paid-up
capital requirement
Up to 70%
US$1 billion (RM3.3 billion)
100%
RM10 million (US$3.3 million or
equivalent in other currencies)
Eligibility criteria
• Reputable regulated institution
• Global Islamic financial market expertise and
resources
• Contribute to Malaysia’s international Islamic
financial hub position
• Well capitalised and reputable licensed
financial institution
• Possess sound track record
• Regulated and supervised by a
competent home regulatory authority
• Adopts international banking
practices1
Application
procedures
• Preparation and submission of application
and original documents in English to BNM
• Meetings with BNM on application – to
provide any additional documents if needed
• Granting of licence by Ministry of Finance to
successful applicants
• Set up office
• Preparation and submission of
application and original documents in
English to BNM
• Meetings with BNM on application – to
provide any additional documents if
needed
• Granting of licence by Ministry of
Finance to successful applicants
• Set up office
Others
• Can set up International Currency Business
Unit, be involved in international market and
enjoy tax holiday
• Can set up as a subsidiary or branch
• Enjoy income tax exemption up to
year of assessment (YA) 2016
• Only allowed to deal in foreign
currencies but can deal with residents
(besides non-residents)
Note:
1
Formulated by the Bank for International Settlements, the Islamic Financial Services Board (IFSB) or any other international
standard-setting bodies of equal standing
Source: www.bnm.gov.my and www.mifc.com
34 / Gateway to Asia: Malaysia, international Islamic finance hub
PricewaterhouseCoopers / 35
Islamic finance: Market segments
Takaful: Untapped,
small but fast growing
Malaysia’s position
Chart 20: Share of global takaful assets in 2009
Globally, the takaful industry
has been growing rapidly,
appealing to both Muslims and
non-Muslims. The industry is
expected to grow by 15% to 20%
annually and estimated to reach
US$14.4 billion (RM47.7 billion)
by 20101.
Malaysia is the second largest
takaful market in the world after
Iran. As at 2008, total assets
of Malaysia’s takaful industry
amounted to US$3.2 billion
(RM10.6 billion), with market
penetration of 7.2%.
Malaysia 26%
UAE 13%
Saudi
Arabia 10%
Bahrain 5%
Iran 31%
Qatar 4%
Tunisia 3%
Indonesia 3%
Others 5%
Source: The Banker Top 500 Islamic Institutions, November 2009
Chart 21: Top five Malaysian takaful institutions in 2009
Global rank
Name
2
Syarikat Takaful Malaysia Bhd
5
CIMB Aviva Takaful Bhd
708.0
7
Takaful Ikhlas Sdn Bhd
309.1
22
Prudential BSN Takaful Bhd
48.9
24
Hong Leong Tokio Marine
Takaful Bhd
30.1
Source: The Banker Top 500 Islamic Institutions, November 2009
1
Total assets
US$ mln
HSBC as cited in Reuters, April 2009
36 / Gateway to Asia: Malaysia, international Islamic finance hub
1,015.4
Size & growth
Malaysia’s takaful industry has
achieved significant progress
since the establishment of the
first takaful company in 1985. The
sector is increasingly recognised
as a significant contributor to the
insurance industry, accounting
for more than a quarter of the
insurance industry underwriting.
Chart 22: Net contributions and total assets of Malaysia’s takaful industry
Net contributions
Total assets
5-yr CAGR
2004 - 2008
3,500
3,000
2,500
2,000
24%
1,500
The sector has enjoyed steady
double digit growth over 2004
to 2008, with net contribution
growing at a CAGR of 24% to
reach US$913.9 million (RM3.0
billion) in 2008, while total takaful
assets grew at CAGR of 19%
to reach US$3.2 billion (RM10.6
billion) in 2008.
Net
contribution
1,000
19%
500
0
Total assets
2004
2005
2006
2007
2008
Source: BNM Annual Takaful Statistics, 2004 - 2008
Chart 23: Market share of takaful in Malaysia in 2008
Takaful
11%
Takaful
8%
Net
contributions
Total
assets
Conventional
insurance
89%
Conventional
insurance
92%
Source: BNM Annual Takaful Statistics 2008
PricewaterhouseCoopers / 37
No. of players
The Malaysian government and
regulators are looking to accelerate
the expansion of takaful business in
tandem with the rapid development
of Islamic banking. Among its key
initiatives, BNM, over the last two
years, has increased the number of
takaful operators from two to eight
and is expected to increase it to
10 with the issuance of two new
family takaful licences to foreign
participants by 2010.
Malaysia’s takaful market also has
significant foreign participation. Five
out of the eight takaful operators
have foreign strategic partners,
namely HSBC, Prudential, Aviva,
Fortis and Tokio Marine.
Product distribution
Growth of the family takaful
industry over the last few years
has been driven by demand for
three products: investment-linked
(which feature low-risk premiums
and high investment component),
single-premium mortgage and
endowment products.
In general takaful, motor-related
policies dominate the market,
accounting for 60% of the
industry’s net contribution. This
is followed by fire and personal
accident products.
Chart 24: Number of local and foreign takaful players in Malaysia, 2009
Local
Takaful operators1
82
Retakaful operators
2
Foreign
1
International takaful operators
1
Total
10
2
New takaful licences to be issued
2
1
Foreign equity participation in takaful operators has been increased to a
limit of up to 70% from 49% under the liberalisation initiatives
2
Includes five local takaful operators with foreign joint venture partners
Source: www.bnm.gov.my
Chart 25: Family takaful new
contributions distribution
Endowment others
9%
Temporary mortgage
29%
Temporary
- others
13%
Medical
& health
5%
Chart 26: General takaful net
contributions distribution
Motor others
60%
Others
5%
Investmentlinked
39%
Source: BNM Annual Takaful Statistics 2008
38 / Gateway to Asia: Malaysia, international Islamic finance hub
Fire 19%
Miscellaneous
8%
Personal
accident
8%
Motor Act
cover
5%
PricewaterhouseCoopers / 39
Over the years, family takaful
valuation surpluses continue to
strengthen to US$204.2 million
(RM705.0 million) in 2008,
indicating further improvements
in the ability of the fund to meet
future liabilities and obligations.
Chart 27: Family takaful excess of income over outgoing
Excess of income over outgoing
Excess of income over outgoing/total income (%)
600
60
500
50
400
40
300
30
200
20
100
10
0
0
2005
2006
2007
2008
2009
Source: BNM Financial Stability & Payment Systems Report, 2009
Chart 28: Family takaful surplus valuation funds
Group accounts
Participants’ special account
200
US$ mln
150
100
50
0
2004
2005
2006
2007
Source: BNM Annual Takaful Statistics, 2004 - 2008
40 / Gateway to Asia: Malaysia, international Islamic finance hub
2008
%
The family takaful fund sector
recorded excess of income over
outgoing of close to 50% in 2009,
attributed to better financial and
market conditions. In particular,
the sector reported a combined
43% jump in net investment
income, profit on sale of assets
and miscellaneous income from
2008.
US$ mln
Profitability & solvency
40
30
20
10
0
-10
2005
2006
2007
2008
2009
¹ Figures have been adjusted to reflect the global business and actual
expenses borne by general takaful fund
Source: BNM Financial Stability & Payment Systems Report 2009
Chart 30: General takaful technical reserves
Technical reserves
% of net contributions
350
190
300
170
250
150
200
130
150
%
Technical reserves (consists of
unearned contribution reserves
and provision for outstanding
claims) maintained by takaful
operators in 2008 were adequate
with a technical reserve ratio of
161% of net contribution.
50
US$ mln
- Higher investment income and
capital gains from the revival of
the financial market
- Lower claims ratio, on account
of lower motor claims
- Growth in gross direct premium
Chart 29: General takaful underwriting profit¹
US$ mln
General takaful reported strong
underwriting profit growth in 2009,
which nearly doubled to US$45
million (RM148 million). This was
supported by a number of factors,
namely:
110
100
90
50
70
0
2004
2005
2006
2007
2008
50
Source: BNM Annual Takaful Statistics, 2004 - 2008
PricewaterhouseCoopers / 41
Market entry
Chart 31: Market entry procedures for takaful operator in Malaysia
Market type
Domestic market
International market
Market entry
Acquire/alliance with existing players
International Takaful Operator (ITO)
Foreign equity
ownership
70% - Takaful companies
100% - Retakaful companies
Minimum paid-up
capital requirement
RM100 million (US$30.2 million)
100%
RM10 million (US$3.3 million or
equivalent in other currencies)
Eligibility criteria
• Reputable regulated institution
• Global Islamic financial market expertise
and resources
• Contribute to Malaysia’s international
Islamic financial hub position
• Well capitalised and reputable licensed
financial institution
• Possesses sound track record
• Regulated and supervised by a
competent home regulatory authority
• Adopts international insurance
practices1
Application
procedures
• Preparation and submission of application
and original documents in English to BNM
• Meetings with BNM on application – to
provide any additional documents if needed
• Granting of licence by Ministry of Finance
to successful applicants
• Set up office
• Preparation and submission of
application and original documents in
English to BNM
• Meetings with BNM on application – to
provide any additional documents if
needed
• Granting of licence by Ministry of
Finance to successful applicants
• Set up office
Others
• Can set up International Currency Business
Unit, be involved in international market
and enjoy tax holiday
• Retakaful operation can set up as a
subsidiary or brunch
• Can set up as a subsidiary or branch
• Enjoy income tax exemption up to YA
2016
• Only allowed to deal in foreign
currencies but can deal with residents
(besides non-residents)
Note:
1
Set by the International Association of Insurance Supervisors or any other international standard-setting body, or adopts any other
international best practices in the financial services related industry
Source: www.bnm.gov.my and www.mifc.com
42 / Gateway to Asia: Malaysia, international Islamic finance hub
PricewaterhouseCoopers / 43
Islamic finance: Market segments
Islamic fund management:
Sizeable, fast growing and
comparable returns
Malaysia’s position
The growth in Shariah-compliant
fund assets globally has been
dramatic, with the industry
expanding at 15% to 20% per
annum due to strong demand for
investment products from rising
oil wealth. Global Islamic funds
are estimated to manage assets
of around US$70 billion (RM231.7
billion) in 2009. Malaysia, together
with the GCC countries, account
for the bulk of the existing assets
under management.
Unlike the GCC countries
which are backed by petrowealth, Malaysia’s Islamic fund
management industry has been
driven by buoyant domestic
private savings stemming from its
vibrant open economy. Having the
largest Islamic fund management
centre in Asia, Malaysia is in a
strong position to place itself as a
gateway for Middle East investors
who want to diversify their portfolio
in the region.
Chart 32: Islamic funds by country of domicile, 2009
Kuwait 10%
Cayman Islands
6%
Saudi Arabia
20%
Bahrain
5%
Indonesia
4%
Luxembourg
4%
Pakistan
3%
Channel
Island
2%
Malaysia
28%
Others 18%
Source: Eurekahedge, January 2010
Chart 33: Top five Islamic funds domicile in Malaysia, January 2010
Global rank
Name
Total assets
US$ mln
5
Public Mutual Bhd
1,950
8
CIMB-Principal Asset
Management Bhd
1,044
23
MAAKL Mutual Bhd
180
25
Pacific Mutual Fund Bhd
159
26
HwangDBS Investment
Management Bhd
157
Source: Eurekahedge, January 2010
44 / Gateway to Asia: Malaysia, international Islamic finance hub
Meanwhile, the combined
net asset value (NAV) under
management has risen steadily
over the last five years, growing
at a CAGR of 27% to US$6.7
billion (RM22.1 billion) in 2009.
The industry’s NAV is expected
to chart further growth in 2010,
underpinned by improving
investor confidence from the
global economic recovery.
Chart 34: Units in circulation and total NAV of Malaysia’s Islamic unit trust funds
Units in circulation
NAV
5-yr CAGR
2005 - 2009
7
50
6
40
5
30
4
20
3
10
0
2004
2005
2006
2007
2008
US$ billion
The Malaysian Islamic fund
management industry has grown
from just two Islamic unit trust
funds in 1993 to 145 funds in
2009. Similarly, the number of
unit trust funds in circulation has
surged to over 56 billion units in
2009, which is three times the size
of units in circulation in 2005.
Billion units
Size & growth
34%
2
Unit
circulation
1
27%
0
Total NAV
Source: www.sc.com.my
Chart 35: Market share of Islamic unit trust in Malaysia, 2009
Islamic funds
21%
Islamic funds
12%
Units in
circulation
Total
NAV
Conventional
funds
79%
Conventional
funds
88%
Source: www.sc.com.my
PricewaterhouseCoopers / 45
No. of players
Foreign fund managers have
also established operations in
Malaysia, including Prudential,
Kuwait Finance House and DBS
Bank. In 2009, the Securities
Commission Malaysia (SC) granted
licences to six new foreign Islamic
fund management companies to
operate in Malaysia.
Chart 36: Number of local and foreign players in Malaysia, 2009
Local
Foreign
Total
4
7
11
Licensed retail fund managers
with Islamic windows
26*
3
29
Total
30
10
40
Licensed Islamic fund
management companies
* Includes one joint-venture management company between local
foreign owners with equal participation
Source: SC Annual Report 2009
Product distribution
Equity-based funds are the most
common type of Islamic unit trust
funds in Malaysia. There is a wide
array of equity funds available,
ranging from funds with higher risk,
higher returns like aggressive growth
funds, to lower risk, lower returns
such as indexed funds. The market
also offers other types of Islamic
funds such as balanced, sukuk and
money market funds.
Chart 37: NAV of Shariah-based unit trust funds by category, 2009
Equity fund
67%
Sukuk fund 6%
Balanced fund 7%
Others* 20%
* Including feeder funds, fixed income funds, money market funds, structured product
and mixed asset funds
Source: SC Annual Report 2009
46 / Gateway to Asia: Malaysia, international Islamic finance hub
Returns
Similar to other Islamic funds
across the region, returns on
Malaysia’s Islamic trust in 2008
was affected by the global
economic crisis. However, the
decline was less severe than in
Asia and Middle East regions.
Returns on the country’s Islamic
unit trust have subsequently
recovered in 2009, reflecting
the trend of increasing returns
globally. Going forward, it is
anticipated that continued
economic recovery will improve
the performance of Islamic unit
trusts.
Chart 38: Average returns of Islamic funds
2009
21.0%
Malaysia
-19.6%
31.2%
Asia Pacific
-27.0%
8.3%
Middle East/Africa
-33.6%
2008
Source: Eurekahedge, January 2010
PricewaterhouseCoopers / 47
Market entry
Chart 39: Market entry procedures for Islamic unit trust fund in Malaysia
Islamic Fund Management Company
Foreign equity
ownership
Minimum paid-up
capital requirement
100%
RM2 million (US$0.6 million or equivalent in other currenices)
Retail activities unit trust funds – RM10 million (US$3.3 million or
equivalent in other currenices)
Eligibility criteria
•
•
•
•
Strong value proposition to contribute to the Malaysian capital market
Good track record in its international operations
Competence in licensing area
Able to provide viable business plan and specific deliverables
Application
procedures
Establishment stage1:
• Complete “Form for Establishment of a Foreign Fund Management
Company”
• Meetings with SC on application
• Granting Approval in Principle (AIP) for successful applicants
Licensing stage (to be completed within six months)
• To complete: Form 1,1A, IB, IC and readiness checklist
• Establish and incorporate the company: Identify directors, key
management, fund management representatives, compliance officer
and Shariah adviser
Note:
1
Applies to a company which does not have a local presence in Malaysia
Source: www.sc.com.my and www.mifc.com
48 / Gateway to Asia: Malaysia, international Islamic finance hub
We are a business gateway between
the Muslim and non-Muslim world
and provide a platform for business
partnerships between the two.
Tun Musa Hitam
Chairman
World Islamic Economic Forum Foundation
PricewaterhouseCoopers / 49
Islamic finance: Market segments
Sukuk: Largest, active and
most developed in the world
Malaysia’s position
The global sukuk market
experienced a challenging year in
2009, with US$19 billion (RM63
billion) new issuances, down from
the record US$33 billion (RM109
billion) issuances in 2007. The
market faced liquidity crunch not
only from the global financial crisis
but also the Dubai financial crisis
and the debate on the compliance
of some of the sukuk structures
with Islamic law.
Chart 40: Islamic bond issued by country, 2009
UAE 14%
Malaysia
54%
Saudi Arabia
13%
Despite the challenging market
environment, Malaysia continued
to be the top world issuer with
over half or 54.1% of the value of
sukuk issued in 2009.
Malaysia’s market players also
generate innovative sukuk
products, with many world’s
first issues, cemented by sizable
amount and innovative structures
(refer chart 42).
Indonesia
7%
Bahrain
6%
Others
6%
Source: S&P and Zawya as cited in REDmoney Islamic Finance News, February 2010
50 / Gateway to Asia: Malaysia, international Islamic finance hub
Chart 41: Top issuers of Islamic bonds, 2009
1
Issuer or group
Nationality
Malaysia (Government)
Malaysia
Amount issued
US$ mln
8,380
2
BNM Sukuk
Malaysia
5,386
3
Bank Negara Malaysia
Malaysia
4,940
4
Bank Indonesia
Indonesia
4,349
5
Petronas Global Sukuk
Malaysia
3,000
6
Dubai DOF Sukuk
UAE
1,931
7
Saudi Electricity
Saudi Arabia
1,867
8
Terengganu Investment Authority
Malaysia
1,420
9
Khazanah Nasional Berhad
Malaysia
1,416
10
Indonesia (Government)
Indonesia
1,300
Source: Thomson Reuters as cited in REDmoney Islamic Finance News, January 2010
Chart 42: Innovative sukuk structure
Year
Sukuk structures
1990
First corporate sukuk by Shell MDS Sdn Bhd
1994
First sukuk Mudharabah by Cagamas Bhd
2001
World’s first corporate sukuk and first Ijarah sukuk by Kumpulan Guthrie Bhd
2002
World’s first sovereign sukuk by the Government of Malaysia
2003
First tradable sukuk Istisna by SKS Power Sdn Bhd
2005
First sukuk Musharakah by Musharakah One Capital Bhd
2005
World’s first Islamic residential mortgage-backed securities by Cagamas MBS Bhd
2006
World’s first exchangeable sukuk by Khazanah Nasional Bhd
2007
World’s first Islamic US dollar subordinated bank capital sukuk by Malayan Banking Bhd
2007
World’s first hybrid sukuk by Nucleus Avenue (Malakoff Corporation)
2007
World’s largest corporate sukuk by Binariang GSM Sdn Bhd
2008
Largest sukuk Ijarah by Telekom Malaysia Bhd via Menara ABS Sdn Bhd
2008
First redeemable sukuk Musharakah with warrants by WCT Engineering
2009
World’s largest international sukuk by Petroliam Nasional Bhd (EMAS Al-Ijarah sukuk)
Source: Various sources
PricewaterhouseCoopers / 51
Size & growth
Malaysia’s sukuk market has
experienced rapid growth in the
last five years, with a CAGR of
around 50%.
The pick-up in sukuk
issuances in 2009 stems from
several internal and external
factors such as BNM interest
rate cuts, introduction of
Danajamin Nasional Berhad
(Malaysia Financial Guarantee
Insurer), the government’s
stimulus package and gradual
improvement in external
conditions towards the second
half of 2009. This has brought
back much needed investors’
confidence back to the market.
Chart 43: Malaysia outstanding sukuk and sukuk issued
Outstanding
Issued
80
5-yr CAGR
2005 - 2009
70
60
50
40
30
47%
20
Outstanding
53%
10
0
Issued
2004
2005
2006
2007
2008
2009
Note: Excludes government securities such as Islamic Malaysian Treasury bill,
Islamic BNM Notes, etc.
Source: Bloomberg, February 2010
52 / Gateway to Asia: Malaysia, international Islamic finance hub
The local bourse, Bursa
Malaysia, is the top world
exchange in terms of value
of sukuk programme listings
in 2009, recording a total of
US$17.6 billion (RM58.3 billion)
bonds listed1.
Malaysia’s sukuk market also
plays a key role in financing the
country’s economy, accounting
for more than half of the
country’s total debt market, both
in terms of balance outstanding
and issuances.
Chart 44: Market share of sukuk in Malaysia, 2009
Sukuk
57%
Sukuk
52%
Outstanding
bonds
Issued
Conventional
bonds
43%
Conventional
bonds
48%
Source: SC Quarterly Bulletin of Malaysian Islamic Capital Market, December 2009
1
Bursa Malaysia led rival exchanges such as Nasdaq Dubai with about US$15.7 billion outstanding bonds listed,
London Stock Exchange with over US$10.5 billion, Luxembourg Stock Exchange with US$$7.3 billion and Bahrain
Stock Exchange with US$$2.18 billion.
PricewaterhouseCoopers / 53
Industry
Demand for Malaysian
sukuk has been largely
driven by infrastructure and
utilities, which account for
more than half of the Islamic
debt market. Other significant
issuers in the sukuk market
include financial services,
diversified holdings and
property and real estate
companies.
Chart 45: Malaysia corporate sukuk by economic sector, 2009
Financial
services
14%
Infrastructure
& utillities
47%
Diversified
holdings
11%
Property &
real estate
9%
Trading &
services
6%
Others
9%
Asset-backed
securities
4%
Source: Rating Agency Malaysia (RAM) Islamic Finance Bulletin, December 2009
54 / Gateway to Asia: Malaysia, international Islamic finance hub
Product concept
Given the issues raised on
guaranteed return element
in sukuk by The Accounting
and Auditing Organization for
Islamic Financial Institutions1
(AAOIFI) in late 2007, there has
been a shift in global sukuk
structure, with Ijarah replacing
Mudharabah as the dominant
issuance in 2008 and 2009.
Malaysia’s sukuk market,
however, has not been
impacted as it is governed
by the local Islamic security
guidelines issued by the SC.
Hence, sukuk structures
based on Musharakah are still
common and account for 36%
of sukuk outstanding in 2009.
Nevertheless, AAOIFI’s
pronouncement will trigger
new developments in the
sukuk market and lead to more
innovation to move to a more
risk-based (profit and loss
sharing) concept instead of
guaranteed returns.
Chart 46: Malaysia corporate sukuk by product concept, 2009
Murabahah 27%
Musharakah
36%
Mudharabah 1%
Istisna 6%
Ijarah 8%
Bai’
Bithaman
Ajil
22%
Source: RAM Islamic Finance Bulletin, December 2009
1
AAOIFI issued a pronouncement in February 2008 to disallow the purchase undertaking in
profit sharing contracts which are equivalent to the sukuk outstanding balance. Instead, the
purchase must be at market value.
PricewaterhouseCoopers / 55
Islamic finance: Market segments
Equity: Large, diversified
and recovering
Malaysia has one of the
most developed Islamic
equity capital market with
a well established market
infrastructure and support
from the government. The
country’s Shariah-compliant
stocks totalled US$167.5 billion
(RM554.4 billion) in December
2009, making it the largest
Shariah-compliant equity
market in the world. In addition,
four of the top 10 largest
Shariah-compliant companies
are from Malaysia.
Apart from size, Malaysia also
leads in innovation, developing
new Islamic equity products
such as the world’s first Islamic
REIT and Asia’s first Islamic
exchange traded fund (ETF).
The size and sophistication
of Malaysia’s Islamic equity
market provides a vibrant
environment for Shariahconscious investors.
Chart 47: Top Shariah-compliant equity market among Muslim countries,
December 2009
200
150
US$ billion
Malaysia’s position
100
50
0
Malaysia
Indonesia
UAE
Saudi Arabia
Source: Bloomberg, February 2010
Chart 48: Top 10 Shariah-compliant stocks among Muslim countries,
December 2009
Rank
Equity stock
Country
Market cap US$ bln
1
Al Rajhi Bank
Saudi Arabia
28.49
2
Etisalat
UAE
21.53
3
Telekomunikasi
Indonesia
20.21
4
Sime Darby
Malaysia
15.67
5
Astra International
Indonesia
14.90
6
Maxis Bhd
Malaysia
11.71
7
IOI Corp Bhd
Malaysia
10.61
8
Tenaga Nasional Bhd
Malaysia
10.60
9
MISC Bhd
Malaysia
9.10
10
Unilever Ind Tbk
Indonesia
8.92
Source: Bloomberg, February 2010
56 / Gateway to Asia: Malaysia, international Islamic finance hub
As part of its ongoing efforts to
spur investments in Malaysia,
in June 2009, the government
announced market-friendly
policies such as the lifting of the
30% Bumiputra (ethnic Malays
and other indigenous people)
shareholding requirement for
initial public offerings (IPOs) and
easing the ownership restriction
covering acquisition of equity
stakes, and mergers and
takeovers.
These initiatives are expected
to further encourage local and
foreign corporate and private
equity investors to raise funds
from Malaysia’s capital market.
In 2009, Malaysia had a total of
13 new IPOs and most of them
were concluded in the fourth
quarter of 2009. Among the
new issues were the relisting of
Maxis Bhd in November 2009,
raising US$3.4 billion (RM11.2
billion), the largest IPO in
Southeast Asia in 2009.
Chart 49: Funds raised from the equity market
(Islamic & conventional) in Malaysia
Fund raised
FBM-KLCI*
8,000
1,750
7,000
1,500
6,000
1,250
5,000
1,000
4,000
Index
As at 30 November 2009, there
were 846 Shariah-compliant
securities as determined by the
Shariah Advisory Council (SAC)
of the SC. This represented
88% of the total listed securities
and 64% of the market
capitalisation (31 December
2009) on Bursa Malaysia.
US$ million
Size & growth
750
3,000
500
2,000
250
1,000
0
0
2004
2005
2006
2007
2008
2009
*FTSE Bursa Malaysia Kuala Lumpur Composite Index
Source: BNM Monthly Statistical Bulletin, December 2009
Chart 50: Market share of total listed securities in Malaysia
Shariah noncompliant equities
12%
Shariah noncompliant equities
36%
Volume
Market
capitalisation
value
Shariah-compliant equities
88%
Shariah-compliant equities
64%
Source: SC’s Malaysian Islamic Capital Market quarterly bulletin, December 2009
PricewaterhouseCoopers / 57
Industry
Malaysia’s Shariah-compliant
equities have a broad coverage
across many sectors, with
the exception of finance. The
prominent market sectors with
Shariah-compliant equities
include industrial products with
32% market share and trading
services at 20%.
Chart 51: Shariah-compliant equities by economic sector, 2009
Trading/
services
20%
Consumer
products
15%
Technology
12%
Properties
9%
Industrial
products
32%
Construction
6%
Others
6%
Source: www.sc.com.my
58 / Gateway to Asia: Malaysia, international Islamic finance hub
Industry
The turnaround in the global
economy, together with
the restoration of investor
confidence, have supported the
strong recovery of Malaysia’s
stock market 2009.
The local Shariah stock index,
FTSE Bursa Malaysia Hijrah
Shariah Index, gained 40% in
2009 and has been consistently
performing better than its global
counterpart, the Dow Jones
Islamic Market Index (DJI100X)
over the last three years (20072009).
The country’s stock market is
set for further growth with the
government’s move to embark
on a second wave of privatisation
to increase liquidity and velocity
in the local stock market. The
government is also encouraging
mergers between domestic
companies to stir foreign investor
interest in Malaysia’s capital
market, by providing a larger
capital base for them to invest in.
Chart 52: FTSE Bursa Malaysia Hijrah Shariah index vs DJI100X
Hijrah
DJI 100x
300
250
200
150
100
50
0
2004
2005
2006
2007
2008
2009
Source: Bloomberg, February 2010
Going forward, Malaysia’s stock
market is expected to strengthen
with the stabilisation of the
international credit market as well
as the recovery of the global and
local economy.
PricewaterhouseCoopers / 59
60 / Gateway to Asia: Malaysia, international Islamic finance hub
SHARIAH
DEVELOPMENTS
Integrated and standardised Shariah environment
Systematic approach to knowledge building
PricewaterhouseCoopers / 61
Shariah developments
Integrated and standardised
Shariah environment
Islamic finance and Shariah
Shariah is a cornerstone in Islamic
finance as it provides the context
for which Islamic funds can flow
into Islamic assets. It covers
Islamic law, conduct and opinions
and forms the basis for Islamic
finance products, transactions and
structure.
Shariah compliance is
consequently essential to the
integrity of Islamic finance and
Malaysia has taken an integrated
and systematic approach
in developing its Shariah
infrastructure for Islamic finance.
Malaysia is also recognised as
having one of the most systemic
approach to Islamic financial
regulation and supervision. The
country’s dual banking model
has been emulated by other
countries including Indonesia,
Pakistan, Qatar, Bahrain, UAE and
Bangladesh1.
Integrated Shariah regulatory
framework
Shariah matters in Malaysia are
regulated through a central body
via BNM’s and SC’s respective
Shariah Advisory Councils (SACs),
which comprise prominent Shariah
scholars, jurists and market
practitioners.
The roles and functions of both
SACs have been further reinforced
by statutory Acts2, which
recognise the SACs as the central
authority for Shariah matters.
BNM’s SAC is the central Shariah
Authority in Islamic banking and
takaful. Its roles include:
• Issuing fatwa (Shariah views)
to be implemented by Shariah
committee of Islamic banks and
takaful companies
• Reference point for Shariah
committee on Shariah issues
in relation to Islamic finance
products and operations
1
From Arab News, “Bank Negara pressing ahead with Shariah parameter”, January 2010
2
Provided by the Central Bank of Malaysia Act, 2009 and Capital Market Services Act, 2007
62 / Gateway to Asia: Malaysia, international Islamic finance hub
The SC’s SAC serves as a single
point of reference on Islamic
capital market (ICM), providing
guidance to all participants in
the ICM on matters pertaining to
Shariah compliance.
Both SACs have helped
standardise Shariah practices
among Islamic financial
institutions, providing a consistent
development path for the industry
and certainty for Islamic financial
players, investors and customers.
As part of the ongoing initiatives
to build good Shariah governance
among Islamic financial
institutions, both Islamic banks
and takaful operators are required
to establish a Shariah committee.
The committee’s role is to advise
Islamic financial institutions on
Shariah compliance in all aspects
of their operations.
PricewaterhouseCoopers / 63
Shariah developments
Systematic approach to
knowledge building
Shariah methodology
The consistent articulation of
fatwas is critical for the growth
and development of the Islamic
finance industry as it is the key
to providing a conducive, sound
and stable legal framework for the
Islamic finance sector to operate.
Malaysia has been one of the
proponents of developing a
systematic approach in formulating
Shariah rulings. BNM, in particular,
has taken various initiatives to
compile, consult and harmonise
fatwas and Islamic finance
products in a transparent manner.
BNM’s Shariah Parameter Reference (SPR)
Malaysia’s methodological approach in formulating
Shariah rulling is exemplified in the development
of BNM’s SPR, which aims to provide a standard
guidance on applying respective Shariah contracts
in Islamic finance as well as to:
• Facilitate comprehensive understanding1 of
the principles and basis for adopting Shariah
contracts
• Harmonise the interpretation and application of
Shariah views and opinions
• Provide an important reference point for the
Shariah committee to arrive at Shariah decisions
pertaining to Islamic financial transactions,
products and services
The SPR initiative aims to define and outline the
essential features of Islamic financial products and
services based on the underlying Shariah contracts
that are endorsed by the Shariah boards and
adopted by Islamic financial institutions.
To ensure the robustness of the SPR, BNM has
conducted extensive research, compiled various
fatwas and views from local and international
Shariah boards and sought feedback from BNM’s
SAC, the academia, international bodies and other
relevant stakeholders.
As of March 2010, BNM has issued SPRs on
Ijarah, Murabahah and Mudarabah contracts and is
finalising work on Istisna and Wadiah SPRs.
1
SPR to serve as an important reference document particularly for Islamic financial institutions, Shariah advisors and academia
64 / Gateway to Asia: Malaysia, international Islamic finance hub
International Shari’ah Research Academy for
Islamic Finance (ISRA)
BNM via the International Centre for Education
in Islamic Finance (INCEIF) set up ISRA in
March 2008 to promote applied research in
the area of Shariah and Islamic finance. This
is achieved through compiling, translating
and publishing fatwas and resolutions relating
to Islamic financial products and structures
across the world. Up to October 2009, ISRA
has translated about 200 fatwas, which are
published in different avenues1.
Apart from compiling fatwas, ISRA is helping to
develop Shariah knowledge through:
• Undertaking Shariah research in Islamic
banking, ICM and takaful
• Providing a platform for greater engagement
among practitioners, scholars, regulators
and academicians through research and
dialogues
• Offering scholarship and research grants
to support and strengthen human capital
development in the areas of Shariah
ISRA is also aiming to develop a comprehensive
research portal in Islamic finance for various
stakeholders to share knowledge.
1
ISRA’s research finds are published in ISRA Bulletin, ISRA International Journal in Islamic Finance,
ISRA Monograph, ISRA Research Papers and ISRA Book Series
PricewaterhouseCoopers / 65
66 / Gateway to Asia: Malaysia, international Islamic finance hub
TAX
NEUTRALITY &
INCENTIVES
Comprehensive tax approach to treating and promoting Islamic finance
PricewaterhouseCoopers / 67
Tax neutrality and incentives
Comprehensive tax approach
to treating and promoting Islamic finance
Tax overview
The government’s comprehensive approach in streamlining tax laws relating to the treatment of
Islamic financial instruments and transactions has put Malaysia at the forefront of Islamic finance and
facilitated the industry’s development.
As far back as 2001, Malaysia already offered a host of tax incentives aimed at promoting the country
as an international Islamic financial centre, and continues to evolve with industry needs.
Chart 53: Streamlined tax structure to facilitate the Islamic finance markets and transactions
Supporting framework
Regulatory framework
Legal Acts
Regulatory
bodies
Other
regulatory and
developing
bodies
Islamic finance
institutions
Islamic capital
market
• Islamic Banking Act 1983
• Takaful Act 1983
• Central Banking Act 2009
• Labuan Islamic Financial
Services and Securities Act 2010
• Development Financial
Institutions Act 2002
• Securities Commission
Act 1993
• Capital Markets and
Services (Amendment)
Act 2010
Tax
Government sukuk
• Income Tax 1867
• Real Property Gains Tax
Act 1976
• Stamp Act 1949
• Government Investment
Act 1983
• Government Funding
Act 1983
Bank Negara Malaysia
Securities
Commission Malaysia
Inland Revenue Board;
Royal Malaysia Customs
Ministry of Finance;
Bank Negara Malaysia
National Shariah
Advisory Council
Shariah Advisory
Council
Tax neutrality
framework
Issuance of
sovereign sukuk
Labuan Offshore
Finance Services
Authority (LOFSA)
The Malaysia
International
Islamic Financial
Centre (MIFC) initiative
68 / Gateway to Asia: Malaysia, international Islamic finance hub
International
Islamic Finance
Market (IIFM)
Islamic Finance
Services Board
(IFSB)
Accounting & Auditing
Organization for
Islamic Finance
Institutions (AAOIFI)
Chart 54: Impact of tax neutrality
No tax neutrality
Tax neutrality
• Disposal of assets/
properties may be
subject to income
tax or capital gains
tax
• Double stamp duty
for the sale and
leaseback of assets/
properties
• Uncertainty in
respect of what a
company can take
as a tax deduction
• Underlying disposal of the assets/properties
required for Islamic transactions will be
disregarded for income tax purposes.
Therefore, no additional tax impact on
the sale and leaseback required in Islamic
transactions
• Stamp duty exemption on the underlying
sale and disposal of assets/properties will
mean that no additional stamp duty will
be applicable compared to a conventional
transaction
• Profit element will be treated as “interest” for
tax purposes. Tax deductibility on expenses
incurred available so long as tests of tax
deductibility has been met
Chart 55: Various tax incentives to promote Malaysia as an international
Islamic financial centre
Tax Incentives
Tax exemption
of Islamic
banks and
takaful
companies
Tax exemption
of fund
managers
Tax deduction
on issuance
costs of Islamic
securities
Exemption from
withholding tax
REITs
Stamp duty
Facilitation of
financing
transactions
Human Capital
Others
PricewaterhouseCoopers / 69
Tax incentives
In line with the Malaysian government’s efforts to promote Malaysia as an International Islamic financial centre,
substantial tax incentives have been provided in the area of Islamic finance.
Tax exemption
of Islamic
banks and
takaful
companies
• Income tax exemption up to Year of Assessment (YA) 2016 for Islamic banks and
Islamic banking units licensed under the Islamic Banking Act 1983 on income derived
from Islamic banking business conducted in international currencies, including
transactions with Malaysian residents; and
Exemption from
withholding tax
Income received by non-residents from financial institutions established under the
Islamic Banking Act 1983, and other financial institutions approved by the Minister
of Finance be exempt from tax as well. This is to streamline tax treatment on profits
received by foreign non-resident customers from all financial institutions.
• Income tax exemption up to YA 2016 for takaful companies and takaful units licensed
under the Takaful Act 1984 on income derived from takaful business conducted in
international currencies including transactions with Malaysian residents.
Profits paid in respect of Islamic securities/debentures (other than convertible loan
stock) to non-residents are exempted from withholding tax. This includes Ringgit
securities approved by SC and non-Ringgit instruments approved by SC or Labuan
Financial Services Authority (Labuan FSA). Profits paid on non-Ringgit Islamic securities
to residents are also exempted if approved by SC or Labuan FSA.
Facilitation
of financing
transactions
The definition of partnership for tax purpose is very wide and includes all types of
partnerships. Hence, any type of partnership, unless specifically excluded, would have
to file tax returns.
In recognising and promoting Islamic financing structures based on the concept of
Musharakah or Mudharabah, such financing transactions need not file partnership tax
returns.
This is effective from YA 2007.
REITs
REITs have also been provided with further boost through several tax initiatives:
• So long as REITs distribute at least 90% of income to investors, the REITs will not
have to pay tax.
• Where a REIT is not subject to tax, distributions to investors will be subject to
reduced withholding tax for five years, namely:
-- Non-corporate investors, including resident and non-resident individuals, that
receive distributions from approved REITs, be subject to a final withholding tax of
10% up to 31 December 2011; and
-- Foreign institutional investors, especially pension funds and collective investment
funds, that receive distributions from approved REITs, will also be subject to a final
withholding tax of 10% up to 31 December 2011.
-- Withholding tax of 25% applies to non-resident corporate investors. Resident
corporate investors will declare such REIT distributions in their tax returns and
subject to normal corporate tax at 25%.
Where a REIT is subject to tax at 25% (i.e. where less than 90% of income is not
distributed), tax credits are available to investors to offset against income in computing
their tax payable.
70 / Gateway to Asia: Malaysia, international Islamic finance hub
Human Capital
In encouraging Malaysians to explore Islamic finance as a career choice, tax relief not
exceeding RM5,000 (US$1,511) per annum is also provided on Islamic finance courses
approved by BNM or SC at local institutions.
Extension of
tax deduction
on issuance
costs of Islamic
securities
Extension of an additional five years to 2015, tax deduction on expenses incurred on
the issuance of Islamic securities based on Ijarah, Istisna’, Mudharabah, Musharakah
and other Islamic securities approved by SC or Labuan FSA.
Stamp duty
Further extension of stamp duty exemption of 20% on instruments of Islamic financing
products approved by the SAC of BNM or SC up to 31 December 2015. This means
that Islamic transactions will suffer less stamp duty by 20% compared to conventional
financing instruments.
100% stamp duty exemption up to 31 December 2016 on foreign currency instruments
executed by International Currency Islamic financial institutions.
Others
Other tax initiatives include:
• Pre-commencement expenses of an Islamic stockbroking company will be allowed
as tax deduction so long as the business commences within two years from approval
by SC. Applications have to be received by SC before 31 December 2015.
• Special purpose vehicles established under the Companies Act 1965 or Offshore
Companies Act 1990 which elects to be taxed under the Income Tax Act 1967, solely
to channel funds for the purposes of issuance of Islamic securities, is not subject to
tax or tax administrative procedures, subject to approval from SC.
• Double deduction on certain expenses incurred for the purpose of promoting
Malaysia as an International Islamic Financial Centre (MIFC) is extended until YA
2015.
• Tax exemption up to YA 2015 on profits derived from the regulated activity of dealing
in non-Ringgit sukuk and advising on corporate finance relating to the arranging,
underwriting and distributing of non-Ringgit sukuk approved by SC or Labuan FSA.
PricewaterhouseCoopers / 71
Tax incentives
International Islamic Bank
International Takaful
Operator
Islamic Fund
Management Company
Market type
International market
Tax exemption
Income tax exemption for International Islamic Bank
(IIB) up to YA 2016.
Withholding tax
exemption
Withholding tax exemption on:
• profits received by resident depositors
(individuals) and non-resident depositors
(individuals and corporate bodies)
• income received by non-resident experts in
Islamic finance
Stamp duty
exemption
Stamp duty exemption up to 2016 on underlying
instruments executed pertaining to Islamic banking
businesses conducted in foreign currencies.
Others
Fast and easy immigration approval for expatriates
in Islamic finance and their family members.
Tax neutrality has been accorded to Islamic financial
instruments and transactions executed to fulfill
Shariah requirements. Malaysia’s tax neutrality
framework promotes a level playing field between
conventional and Islamic financial products.
Market type
International market
Tax exemption
Income tax exemption for International Takaful
Operator (ITO) up to YA 2016.
Withholding tax
exemption
Withholding tax exemption on income received by
non-resident experts in Islamic finance.
Stamp duty
exemption
Stamp duty exemption up to 2016 on underlying
instruments executed pertaining to takaful
businesses conducted in foreign currencies.
Others
Fast and easy immigration approval for expatriates
in Islamic finance and their family members.
Market type
International market
Tax exemption
Income tax exemption for Islamic Fund Management
Company (IFMC) on all income derived from a
business of providing fund management services to
local and foreign investors up to YA 2016.
Withholding tax
exemption
Income tax exemption on income received by nonresident experts in Islamic finance.
Others
Fast and easy immigration approval for expatriates
in Islamic finance and their family members.
Islamic fund management companies are allowed to
invest all their Shariah funds abroad.
72 / Gateway to Asia: Malaysia, international Islamic finance hub
PricewaterhouseCoopers / 73
74 / Gateway to Asia: Malaysia, international Islamic finance hub
PwC
ISLAMIC
FINANCE
SERVICES
PricewaterhouseCoopers / 75
PwC Islamic finance services
Global reach, local knowledge
With the enhanced focus and
expansion of Islamic finance to all
areas of financial services globally, it
becomes increasingly important to
have advisors who can apply their
knowledge to products and services
relating to Islamic finance, locally
and globally.
The PricewaterhouseCoopers (PwC)
in Malaysia Islamic finance team
has extensive experience in Islamic
finance and banking developments
in Malaysia, working with regulators
to achieve their strategy to
evolve Malaysia as an integrated
international Islamic banking and
financial hub. Our Islamic finance
team has performed audit reviews,
and provided advisory services and
tax advice to local and international
banks and regulatory bodies.
PwC gained market recognition in
Islamic finance when it was voted
“Best Islamic Consultancy” in
REDmoney’s Islamic Finance News
(IFN) Awards Poll 2009. The IFN
Poll recognises the best providers
of Islamic financial services across
a series of markets and sectors
as voted by Islamic finance
practitioners globally.
Besides being a Partner of PwC
Malaysia, Mohammad Faiz Azmi is
also the Global Leader in Islamic
finance, leading the Global Islamic
Finance Team (GIFT) with team
members in Kuala Lumpur, Dubai,
Bahrain and London. GIFT acts as a
coordinating unit to manage PwC’s
service offerings globally and has
been providing services in strategy,
IT, tax, audit and performance
improvement work to Islamic finance
entities globally.
76 / Gateway to Asia: Malaysia, international Islamic finance hub
PwC Malaysia voted
Best Islamic Consultancy
Connect with us
for these services
Accounting & tax services
• Statutory audits
• Shariah audit services
• Financial accounting advice - application of accountng
standards and treatment of financial instruments
• AAOIFI gap analysis and application
• Basel II work in relation to the implementation of Islamic
Financial Services Board (IFSB) Capital Adequacy Standard
• Sukuk financial advisory
• Tax advisory and planning
Licensing & compliance
• Licence application and other regulatory approval
• Licensing and legal vehicle assessment and selection
• Start-up support for new entities or ventures in banking,
takaful or capital market-related institutions
• Inventorise and advice on local regulatory obligations and
expectations of local regulators
• Develop and implement local compliance requirements,
including standards, policies and procedures
We can assist
foreign clients in the
following areas
• Application of licences:
-- International Islamic
Banking licence
-- International Takaful
Operator licence
• Feasibility studies and
business plans for submission
during licence application
• Liaise with MIFC regulators i.e.
BNM, SC, Labuan FSA and
Bursa Malaysia
• Provide advisory services on
related Malaysian laws such
as Islamic Banking Act 1983,
Takaful Act 1984, Exchange
Control Act 1953
Strategy and business advisory
• Strategy and business planning
• Feasibility studies and business plans
• IT conversions for Islamic financial reporting
• Process improvement of banks and takaful operators
• Training on subjects such as AAOIFI standards
• Internal audit training
• Transaction support on acquisition of assets or entities
PricewaterhouseCoopers / 77
Contact us
PricewaterhouseCoopers
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78 / Gateway to Asia: Malaysia, international Islamic finance hub
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PricewaterhouseCoopers publications
International Islamic
Bank
Islamic Fund
Management Company
International Takaful
Operator
Liberalisation of
Malaysia’s Financial
Services sector
Growing pains:
Managing Islamic
banking risks
Shariah-compliant
funds: A whole new
world of investment
Takaful: Growth
opportunities in a
dynamic market
Open to comparison:
Islamic finance and IFRS
-PUHUJPHS:LY]PJLZ
6WLU[VJVTWHYPZVU!
0ZSHTPJÄUHUJL
HUK0-9:
The day after tomorrow
A PwC perspective on the
Gobal Financial Crisis
Banking Banana Skins
2010
Basel Committee
proposals for
‘Strengthening the
resilience of the banking
sector’
Balance sheet
management
benchmark survey
PricewaterhouseCoopers / 79
80 / Gateway to Asia: Malaysia, international Islamic finance hub
Appendices
The Malaysia International Islamic Financial Centre (MIFC) initiative
Islamic finance products & concepts
Islamic finance glossary
Acronyms
PricewaterhouseCoopers / 81
Appendices
The Malaysia International
Islamic Financial Centre (MIFC)
initiative
In August 2006, the Malaysia International Islamic
Financial Centre (MIFC) initiative was launched
to position Malaysia as a hub for international
Islamic finance.
The MIFC initiative comprises a community
network of the country’s financial and market
regulators, including BNM, SC, Labuan FSA
and Bursa Malaysia; Government ministries and
agencies together with industry participation from
the banking, takaful, capital market institutions,
human capital development institutions and
professional services companies which are
participating and working collaboratively in the
field of Islamic finance.
The MIFC initiative is supported by global legal,
regulatory and Shariah best practices that enable industry
practitioners to conduct international business in Islamic
finance activities anywhere in Malaysia in the areas of
sukuk origination, Islamic fund and wealth management,
international Islamic banking, takaful and human capital
development, while enjoying attractive incentives.
Through the “Shaping Islamic Finance Together” brand
proposition, Malaysia welcomes global talents, leading
players, issuers and investors to shape the future of
Islamic finance, together through the MIFC initiative,
leveraging on and benefiting from Malaysia’s more than 30
years of experience in Islamic finance, in an environment
of innovation and thought leadership.
Visit www.mifc.com
82 / Gateway to Asia: Malaysia, international Islamic finance hub
Chart 55: Malaysia’s Islamic finance industry is globally integrated
MIFC
•
•
•
•
Labuan FSA
International Islamic Banks
International Takaful Operators
Labuan International Financial
Exchange (LFX)
Islamic equity
E.g. international Shariahcompliant securities and
indices, Shariah-based REITs
and Islamic ETFs
•
•
•
•
•
International Islamic finance institutions
International investment banks
Islamic fund managers
International pension funds
Sovereign wealth funds
Sukuk
E.g. international sovereign
sukuks, corporate sukuks,
Islamic exchangeable bonds
and sukuk exchange
International Shariahbased fund management
• International Currency
Business Unit (ICBU)
• ICBU for Islamic banks
• ICBU for takaful operators
Islamic banking
E.g. foreign currency
Shariah-based financing,
deposits, trade financing and
investment banking
Takaful
E.g. international family
takaful, general takaful and
retakaful
International Islamic structured
investment products
Islamic finance market
Islamic capital market
International
International
Islamic finance system
Domestic
Domestic
Islamic capital market
Islamic equity
E.g. Shariah-compliant
securities and indices,
Shariah-based REITs and
Islamic ETFs
Shariah-based unit trust/
mutual funds
Pension
fund
Islamic finance market
Sukuk
E.g. government sukuks,
corporate sukuks, Islamic
exchangeable bonds and
sukuk exchange
Islamic banking
E.g. Shariah-based financing,
deposits, trade financing,
investment banking and
Islamic Interbank Money
Market (IIMM)
Takaful
E.g. family takaful, general
takaful and retakaful
Islamic structured
investment products
Fund/unit trust
management companies
Pilgrim fund board
Islamic stockbroking
services
Investment banks
Islamic banks Takaful operators
Islamic financial institutions
Source: PricewaterhouseCoopers
PricewaterhouseCoopers / 83
Appendices
Islamic finance
products & concepts
• Islamic banking
• Islamic interbank
money products
• Takaful
• Islamic retail
products
• Islamic debt
securities (sukuk)
• Shariah-compliant
equity & indices
• Shariah-based unit
trust funds
• Other Islamic
investment products
Islamic banking
Ijarah
Modern Islamic finance was
developed as an intermediation
channel for Muslims to conduct
their savings and investment
activities in accordance with
Islamic principles.
Ijarah is a lease financing
structure. In the lease
arrangement, the financier leases
equipment, building or other
facilities to a client at agreed
rental fees or charges.
Today, over three-quarters of
Islamic bank financing revolves
around three financing concepts,
namely:
In one of the leasing products,
Ijarah Thumma Al-Bai, the
lease agreement includes the
subsequent purchase of leased
asset at the end of the lease
tenure.
1. Bai’ Bithaman-Ajil (deferred
payment sale)
2. Ijarah (leasing)
3. Murabahah (cost-plus profit
margin)
Bai’ Bithaman-Ajil (BBA)
BBA is a contract for sale of goods
on a deferred payment basis for
property, vehicle and financing of
other consumer goods. Under the
scheme, the property or asset will
be purchased by the financier and
sold at an agreed price once the
tenure and manner of repayment
is agreed upon. The repayment
amount is usually fixed throughout
the whole period of contract.
84 / Gateway to Asia: Malaysia, international Islamic finance hub
Murabahah
Under Murabahah, the seller
purchases the asset at cost and
sells it back to the customer at
a marked-up price agreed to by
both parties. It is an agreement
that refers to the sale and
purchase transaction for the
financing of an asset or project,
whereby the costs and profit
margin are made known and
agreed to by all parties involved.
Islamic interbank money
market (IIMM) products
Mudharabah Interbank
Investment (MII)
The IIMM covers the Mudharabah
interbank investment and
interbank trading of Islamic
financial instruments which are
essential in managing short term
liquidity needs of Islamic banks.
The commonly traded Islamic
interbank money products in the
money market include:
MII refers to a mechanism whereby
a deficit Islamic banking institution
(investee bank) can obtain
investment from a surplus Islamic
banking institution (investor bank)
based on Mudharabah (profitsharing). The investment period
is from overnight to 12 months,
while the rate of return is based
on the rate of gross profit before
distribution for investment of one
year of the investee bank. The
profit-sharing ratio is negotiable
between both parties.
• Mudharabah Interbank
Investment
• Government Investment Issues
• Malaysian Islamic Treasury Bills
• Bank Negara Negotiable
Notes-i
• Commodity Murabahah
At the time of negotiation, the
investor bank and investee bank
will agree to the profit-sharing
rate upfront.
Government Investment Issues
(GII)
The Malaysian government issues
non-interest bearing certificates
known as GII to facilitate Islamic
banks’ purchase of liquid securities
to meet the statutory liquidity
requirements as well as to park
idle funds. The GII was introduced
in July 1983 under the concept of
Qard Al-Hasan.
Malaysian Islamic
Treasury Bills (MITB)
MITB are short-term securities
issued by the Malaysian
Government based on Bai Al-Inah
principle (sale and immediate
purchase). BNM on behalf of
the government will sell the
government’s assets through tender
to form the underlying transaction
of the deal. The MITB price is
determined after profit element is
imputed (discounting factor) and
issued to successful bidders to
represent the debt created in return
for the cash receipt. The bidders will
subsequently sell back the assets
to the government at par based on
credit term.
Bank Negara Negotiable
Notes-i (BNNN-i)
BNNN-i are Islamic securities issued
by BNM using Islamic principles
which are deemed acceptable to
Shariah requirement. Issuances
of BNNN-i can be either on a
discounted or a coupon-bearing
basis depending on investors’
demand. Discount-based BNNN-i
is traded using the same market
convention as MITB while the profitbased BNNN-i adopts the market
convention of GII.
Commodity Murabahah
Commodity Murabahah is a sale of
certain specified commodity, at cost
plus mark-up.
The Commodity Murabahah
Programme (CMP) launched by
BNM in 2007 utilises crude palm
oil-based contract as an underlying
asset. CMP provides certainty of
returns as it is undertaken based on
pre-agreed margin or mark-up from
the sale and purchase of the
underlying assets.
PricewaterhouseCoopers / 85
Takaful
General takaful
Takaful is an insurance concept
in Shariah whereby a group of
participants mutually agree to
guarantee each other against
defined loss or damage that may
be inflicted upon any of them by
contributing as tabarru (donation,
gift or contribution) or donation
to the takaful funds operated by
a takaful operator. It emphasises
unity and cooperation among
participants.
General takaful refers to takaful scheme
for short-term basis, usually 12 months,
to compensate its participants for any
material loss, damage or destruction
they might suffer arising from a
misfortune that might be inflicted upon
their properties or belongings.
Tabarru is the core of the takaful
system that makes the uncertainty
element allowable under the
takaful contract.
If at the end of the period, there is a
net surplus in the general takaful fund,
the surplus shall be shared between
the participants and the operator
in accordance with the principle of
Mudharabah. This is provided that the
participant has not incurred any claims
and/or received any benefits under the
general takaful certificate.
Family takaful
The family takaful plan is a combination
of long-term investment and mutual
financial assistance scheme similar
to the conventional life insurance.
The objectives of this plan are to save
regularly to earn investment returns
in accordance with Islamic principles
and to obtain coverage in the event of
death prior to maturity from a mutual
aid scheme. Each contribution paid is
credited into two separate accounts for
contribution and savings or investment.
86 / Gateway to Asia: Malaysia, international Islamic finance hub
Islamic retail products
Malaysia offers a comprehensive array of Islamic financial products and services onshore and offshore, ranging from
retail to wholesale banking, takaful, money as well as capital and bond markets.
Islamic banking product
Takaful products
Investment products
Financing
Family takaful
Hire purchase
Cash line facility
Share financing
Leasing
Fixed asset financing
Term financing
Working capital financing
Revolving credit facility
Equipment financing
Project financing
Contract financing
Joint venture
Bridging financing
Export credit refinancing
Endowment takaful
Medical and health takaful
Investment-linked takaful
Education plan takaful
Mortgage takaful
Annuity takaful
Travel takaful
Shariah-compliant stocks
Shariah-based unit trust funds
Islamic REITs
Islamic structured investment
products
Islamic stockbroking services
Trade Financing
Letter of credit
Accepted bill
Trust receipt
Bank/shipping guarantee
Inward/outward bills for collection
Multi-currency trade financing
facility
Indirect exported financing
scheme
General takaful
Motor takaful
Fire takaful
Personal accident takaful
Engineering takaful
Marine, aviation and transit takaful
Contractor’s all risks and engineering
takaful
Liability takaful
Workmen compensation takaful
PricewaterhouseCoopers / 87
Islamic debt securities (sukuk)
Musharakah
Bai’ Bithaman Ajil (BBA)
Sukuks are Islamic
bonds which have similar
characteristics with a
conventional bond, the
difference being that they are
asset-backed1 and free from
usury (interest).
Musharakah is a partnership
financing agreement between two
parties or more to engage in a
specific business activity. All the
partners are entitled to a share in
the profits of a project at a
mutually agreed ratio, while losses
are shared in proportion to the
amount invested. In addition,
partners who contribute funds
have the right to exercise executive
powers in the project, similar to a
conventional partnership structure
and the holding of voting stocks in
a limited company.
BBA is a deferred-payment sale
agreement. It is a contract that
refers to the sale and purchase
transaction for the financing of
an asset on a deferred and an
instalment basis with a pre-agreed
payment period. The sale price will
include a profit margin.
Sukuks are structured with a
no interest element. They are
linked to the returns and cash
flows of the financing to the
assets purchased or the returns
generated from the assets
purchased. This is done to
avoid trading of debts, which
is prohibited under Shariah.
Among the major sukuk-based
concepts in Malaysia are:
•
•
•
•
•
Musharakah
Ijarah
Murabahah
Istisna
Bai’ Bithaman Ajil
Murabahah
Murabahah is a contract of cost
plus profit margin. It involves a
financier acquiring an asset for
a purchaser. A price margin is
imputed into the sale of the asset
from the financier to the end
purchaser. Typically, commodity
trade financing is accomplished
with Murabahah sukuk.
88 / Gateway to Asia: Malaysia, international Islamic finance hub
Ijarah
Ijarah, which is equivalent to
leasing, involves the transfer
of the property against the
consideration of periodic rentals.
The Ijarah arrangement can help
financiers create a secondary
market through securitisation
of the leased assets. Since the
lessor in Ijarah owns the leased
assets, the lessor can sell the
assets to a third party who
replaces the seller’s rights and
obligations.
Istisna
Under Istisna (pre-delivery and
leasing), the financier provides
funds to the supplier, who agrees
to produce, manufacture or
construct a specific asset. The
financier thus acquires the title
of the asset and will sell or lease
the asset back. Manufacturing
and construction financing are
common projects supported with
financing via Istisna. Istisna is
also suited for long-term project
financing e.g. infrastructure
construction.
Shariah-compliant
equities and indices
Islamic equity
Islamic equity indices
The Islamic equity sector
comprises products such as
Shariah-compliant securities
listed on Bursa Malaysia and
Islamic mutual funds or Islamic
unit trust funds. The SC’s
SAC list of Shariah-compliant
securities provides essential
reference as well as confidence
for Muslim investors in identifying
and investing in Shariahcompliant securities.
The availability of Shariahcompliant securities led to the
introduction of the Islamic stock
equity index in 1999, known as
the Kuala Lumpur Shariah Index,
to meet the demands of local
and foreign investors who seek
to invest in Shariah-compliant
securities. This Index facilitates
the tracking and benchmarking
of the performance of such
securities listed on the Main Board
of Bursa Malaysia. The Index was
subsequently replaced in 2007
when the FTSE Bursa Malaysia
EMAS Shariah and FTSE Bursa
Malaysia Hijrah Indices were
introduced.
The FTSE Bursa Malaysia EMAS
Shariah Index is designed to
provide investors with a broad
benchmark for Shariah-compliant
investment for the Malaysian
market. This Index features:
• Constituents of the FTSE Bursa
Malaysia EMAS Index
• Equities that are in compliance
with the screening requirements
of the SAC
The Index takes the constituents
of the FTSE Bursa Malaysia EMAS
Index, which has been free float
weighted and liquidity screened,
and overlays the SAC screening
methodology to derive a highly
investable and transparent Shariah
compliant index.
The FTSE Bursa Malaysia Hijrah
Index is targeted to attract global
investors. This Index comprises:
• The largest 30 companies on
the FTSE Bursa Malaysia EMAS
Index
• Equities that are screened by
the SAC and global Shariah
consultancy, Yasaar Ltd, to
meet the requirements of
international Shariah-compliant
investors
There is also a Dow Jones Islamic
Market Index series which RHB
Capital Bhd and Dow Jones &
Co Inc launched in 2005. The
Dow Jones-RHB Islamic Malaysia
Index, a co-branded Islamic Index,
adopts the methodology of the
Shariah-compliant index family.
PricewaterhouseCoopers / 89
Shariah-based unit trust funds
Shariah-based unit trust funds
are collective investment
funds that offer investors with
the opportunity to invest in a
diversified portfolio of Shariahcompliant securities managed
by professional managers
in accordance with Shariah
principles. The schemes are
available in many forms such as
Islamic equity funds, bond funds,
index funds and others.
Islamic Exchange Traded Funds
(ETFs) are index tracking fund
that are listed and traded on
a stock exchange. Islamic
ETFs only track an Islamic
benchmark index where the index
constituents comprise companies
which are Shariah-compliant.
Other Islamic
investment products
Islamic Real Estate Investment
Trusts (REITs)
Islamic REITs are collective
investment funds that pool
money from investors to buy,
manage and sell real estate
through Shariah-compliant
capital market instruments. A
REIT contract is binding on all
investors through a musharakah
or partnership structure.
There are currently two Islamic
REITs in the market. The first
REIT was launched by the
healthcare sector, the Al-Aqar
KPJ REITs, in 2006 with a fund
size of US$49 million (RM180
million). The other Islamic REIT
is the Al-Hadharah Boustead
REIT which made its debut in
2007 with US$67 million (RM230
million) raised.
90 / Gateway to Asia: Malaysia, international Islamic finance hub
Islamic structured investment products
Structured investment products are
synthetic investments which can be
an alternative to direct investments,
as part of the asset allocation process
to reduce risk exposure of a portfolio
or to leverage current market trends.
Similar to its conventional counterpart,
Islamic structured investment products
have become an increasingly important
investment tool for both investors and
wealth managers.
A new addition to Islamic structured
investment products is the CIMB Islamic
All-Stars Global Restricted Mudharabah
Structured Investment. The structured
investment product combines 100%
capital protection, if held to its five-year
maturity period, with returns linked to
the performance of 20 global blue chip
multinational companies.
Islamic stockbroking services
Islamic stockbroking services began in
1994. Currently, there are three players
that provide both conventional and
Islamic stockbroking services.
PricewaterhouseCoopers / 91
Appendices
Islamic finance glossary
Islamic term
Definition
Bai
Sale
Bai Al-Inah
• A contract of sale and purchase of an asset whereby the seller sells to the buyer in cash
and subsequently buys back the asset at a marked up deferred price
• A contract of sale and purchase of an asset whereby the seller sells to the buyer at a
deferred price and subsequently buys back at a lower cash price
Bai’ Bithaman-Ajil
Contract for sale of goods on a deferred payment basis for property, vehicle and other
consumer goods
Fatwa
Islamic rules derived from Quran and Sunnah
Hijrah
Muslim calendar
Ijarah
Hiring of services or leasing of assets
Ijarah Thumma
Al-Bai
Lease agreement and subsequent purchase of leased asset at the end of the lease tenure
Istisna
A contract of sale of specified items to be manufactured or constructed, with an obligation
on the part of the manufacturer or builder (contractor) to deliver them to the customer upon
completion
Mudharabah
Agreement between capital provider and entrepreneur to enable the entrepreneur to carry
out business activities. Profit will be shared on pre-determined ratio and losses will be borne
by capital provider
Murabahah
The sale of goods at cost plus agreed profit mark-up
Musharakah
Partnership financing agreement between two parties or more to engage in a specific
business activity
Note:
Spellings of the glossary are done with the closest match to its Arabic origins. There is also no capitalisation of Arabic words except
as specified or when grammar requires it.
92 / Gateway to Asia: Malaysia, international Islamic finance hub
Islamic term
Definition
Qard Al-Hasan
Benevolent loan, interest-free loan
Shariah
Set of rules derived from both the holy Quran and the authentic traditions (Sunnah) of the
Prophet (PBUH) and the scholarly opinions (ijtihad) based on Quran and Sunnah
Shariah advisor
Independent professional, usually a classically trained Islamic legal scholar who advises an
Islamic bank on the compliance of its products and services with Islamic law
Shariah-compliant
Act or activity that complies with the requirements of the Shariah principle
Shariah principle
Principle derived from the Quran and Sunnah
Shariah schools
of thought
Hanafi - Considered the oldest and most liberal
Maliki - Appeals to common utility, the idea of the common good
Shafii - Considered as the easiest school of thought
Hanbali - Considered the most conservative in terms of social and personal rules
Sukuk
Islamic bonds. These bonds have similar characteristics with a conventional bond with some
differences
Tabarru
Donation, gift or contribution
Takaful
Islamic insurance
General takaful - short-term takaful schemes, usually 12 months
Family takaful - long-term takaful schemes, similar to conventional life insurance
PricewaterhouseCoopers / 93
Appendices
Acronyms
Acronyms
Definition
AAOIFI
Accounting and Auditing Organization for Islamic Financial Institutions
ABS
Asset-backed securities
BBA
Bai’ Bithaman Ajil
BNM
Bank Negara Malaysia (central bank of Malaysia)
BNNN-i
Bank Negara Negotiable Notes-i
CAGR
Compound annual growth rate
COE
Centre of excellence
DJI100X
Dow Jones Islamic Market Index
EPF
Employees Provident Fund
ETF
Exchange traded fund
FBM-KLCI
FTSE Bursa Malaysia Kuala Lumpur Composite Index
FSMP
Financial Sector Master Plan
FT
Federal Territories
GCC
Gulf Cooperation Council (GCC countries include Saudi Arabia, Bahrain, Kuwait, Qatar, Oman and
the United Arab Emirates)
GCI
Global Competitiveness Index
GIFT
Global Islamic Finance Team
GII
Government Investment Issue
ICBU
International Currency Business Unit
ICM
Islamic capital market
ICT
Information communication technology
IFN
Islamic Finance News
94 / Gateway to Asia: Malaysia, international Islamic finance hub
Acronyms
Definition
IFSB
Islamic Financial Services Board
IFSL
International Financial Services London
IIB
International Islamic Bank
IIMM
International Interbank Money Market
IMF
International Monetary Fund
INCEIF
International Centre for Education in Islamic Finance
IPO
Initial public offering
ISRA
International Shari’ah Research Academy for Islamic Finance
ITO
International Takaful Operator
KLSI
Kuala Lumpur Shariah Index
Labuan FSA
Labuan Financial Services Authority
MIFC
Malaysian International Islamic Financial Centre
MII
Mudharabah Interbank Investment
MITB
Malaysian Islamic Treasury Bills
NAV
Net asset value
OPR
BNM’s overnight policy rate
RAM
Rating Agency Malaysia
REIT
Real Estate Investment Trust
RM
Ringgit Malaysia
SAC
Shariah Advisory Council
SC
Securities Commission Malaysia
YA
Year of assessment
PricewaterhouseCoopers / 95
PricewaterhouseCoopers
drew on the support of its
staff members with varied
experience and knowledge.
96 / Gateway to Asia: Malaysia, international Islamic finance hub
Project team
Partner
Mohammad Faiz Azmi
Senior Executive Directors
Chin Suit Fang
Jennifer Chang
Project team
Pearlene Cheong
Ong Khar Keong
Thai Yong Ching
Kuok Yew Kuan
Editor
Haniza Taufik
Designer
Karen Chong
PricewaterhouseCoopers / 97
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98 / Gateway to Asia: Malaysia, international Islamic finance hub