Bank Islam continues to focus on affordable housing segment

We are already adopting the right model to support this affordable segment, says CEO


Bank Islam Malaysia Bhd expects its home financing business model, which targets specific markets, will continue to help the bank to grow and boost its assets.

Malaysia’s oldest Islamic lender has been growing organically over the years, despite the crowded market in the Shariah-compliant sphere.

“If you look at our focus on financing, we have always been targeting the affordable housing segment. We do not normally go for the high-end properties,” said Bank Islam CEO Mohd Muazzam Mohamed.

“Our focus has always been on affordable financing and first-time homebuyers, and it is all within what the government aspires to do.

“We are already adopting the right model to support this affordable segment,” he said at the launch of Bank Islam’s new Al-Awfar investment in Kuala Lumpur yesterday.

There have been calls for banks to relax lending and financing rules, but lenders are guided by the central bank’s lending regulations which have been strict to prevent the rise of household debts.

Mohd Muazzam said the Islamic bank will continue with its current business model which is in line with the governments’ directive.

“It is not going to change our business model because the government aspiration is well within what we are doing and we will continue to support their policies.

“We have been growing our house portfolio and it has proven to be successful and sustainable.

“In terms of lending rules, we are bound by Bank Negara Malaysia’s responsible financing guidelines,” he said.

Last month, Finance Minister Lim Guan Eng said banks are urged to ease the lending requirements to reduce the drawback faced by individuals and businesses in securing financing.

Lim added that as the country does not impose windfall tax, which is a levy on businesses’ unforeseen excessive profit, banks should be more flexible in their lending arrangements.

Meanwhile, Mohd Muazzam said Bank Islam has allocated RM300 million to be utilised until 2021 as part of its digitalisation directive.

“RM300 million is for the use of our technology, infrastructure and digitalisation, which is going to be utilised in the next three years until 2021.

“It is not something that we can do all at once. There are certain infrastructure that you need to get up first,” he said.

He added that the allocation will be concentrated on enhancing the bank’s back-end processes in order to expedite the turnaround time, as well as to strengthen its online presence.

“We will also embark on things such as artificial intelligence and robotic process automation,” he said.

He said the bank aims to increase its financing for small and medium enterprises (SMEs) by RM200 million in 2019 from the current portfolio of RM2.2 billion as at end-2018.

“We have a dedicated SME banking division that we set up last year. We will continue to pursue our SMEs portfolio, which is currently at RM2.2 billion, and we are targeting another RM200 million.

“We are enhancing our capability to be able to assist SMEs who are on the lower tier. Now, most of the SMEs are concentrated at the medium tier and we want to develop those who are at the bottom,” he said.

According to Bank Islam’s Annual Report 2017, its total financing stood at RM42.11 billion with the consumer portfolio taking up 75% or RM32 billion.

Separately, Mohd Muazzam said Bank Islam is targeting to increase its investment fund to RM800 million under its Al-Awfar product, which has been refreshed since its establishment in 2009.

“In the last decade, Bank Islam has received an overwhelming response on Al-Awfar and we have achieved a good track record with a total fund size of RM2.45 billion through 771,496 accounts.

“We decide to improve this product and increase the prizes from a total value of RM10 million to over RM14 million,” he said.

Mohd Muazzam said the bank aims to attract 230,000 new customers of the product this year.