This is due to growing participation from the conventional industry players in the sector
by SHAHEERA AZNAM SHAH / Pic by MUHD AMIN NAHARUL
The government is con dent that the Islamic nance (IF) sector will recover, although the growth is currently in a declining rate.
Finance Ministry deputy secretary general (policy) Datuk Siti Zauyah Md Desa said the optimism is attributable to growing participation from the conventional industry players in the sector.
“From the government’s view, we are satisfied with the industry and how it is growing. We have seen an increase in participation from the conventional institutions in the sector, in terms of products and mergers.
“We believe that Islamic banking will be the key financial product required by the public, as it provides the underlying concept that is different from the conventional finance,” Siti Zauyah said at the 7th Annual Asia Islamic Banking & Takaful Conference in Kuala Lumpur yesterday.
“Although the growth is slow (at the moment), with the global market being relatively small, the growth in terms of sukuk issuances in Malaysia has been robust,” she said.
Based on Bank Negara Malaysia’s (BNM) recent strategic paper, Malaysia’s annual growth rate for the IF sector was dragged from 24.2% in 2011 to only 8.2% in 2016. However, the sector’s market share was seen progressing from 7.1% in 2010 to 8.2% in 2016.
Siti Zauyah further said to hasten the growth, IF industry players and the banking sector should leverage on financial technology (fintech).
“We are leading in the sukuk market in terms of issuances and innovating more sukuk products, but if we look at the entire industry at a macro level, there is still plenty of room to grow.
“Through the implementation of fintech on a larger scale, it will eventually enhance the country’s IF industry and the global market at large,” she said.
Commenting on the uncertainties in the fintech industry, Siti Zauyah said the role of a regulator is crucial in monitoring the fintech industry as it is still developing at an early stage.
“Fintech, even for conventional banking, is still growing at a development stage and many still do not know the impact of it. As for the uncertainties, it is the new norm for us. The most vital thing is the need for a framework to manage these uncertainties.
“This is where the central bank will come into play by introducing the right framework to regulate the sector, and preventing risk such as fraud. As at now, the central bank has been proactive in providing the regulatory sandbox,” she said.
Last year, BNM introduced the Investment Account Platform that encompasses a consortium of six Islamic banking institutions.
It aims to facilitate direct investment in a viable environment and provide investors with direct access to a wider range of investment opportunities, businesses and banks.
The central bank had also introduced the fintech regulatory sandbox framework in October 2016, in line with the government’s vision to bolster up the fintech industry.