Islamic banking continues to expand in 2019

Financing for purchase of residential property was the biggest contributor to Islamic banking financing last year, with RM184.4b recorded in December


MALAYSIA’S Islamic banking sector continued to rise in 2019, adding RM63.38 billion to total assets for the January through December period boosted by the home financing segment.

As at December 2019, total Islamic banking assets stood at RM835.19 billion, up 8.2% from RM771.81 billion recorded in the same month of 2018, according to data from Bank Negara Malaysia.

Tracing back to December 2007, total equities and liabilities for Islamic banking in the country amounted to just RM152.93 billion.

Total financing across the industry rose to RM618.2 billion as at end-2019, 8% higher from RM572.62 billion the year before.

Financing for purchase of residential property was the biggest contributor to Islamic banking financing last year, with RM184.41 billion worth of financing recorded in December — up 15% from RM160.35 billion recorded in December 2018.

The figure is a massive increase compared to the financing for purchase of residential property totalling RM17.86 billion in December 2007.

Credit card financing also saw a big jump over the years. Total financing of credit cards as of last December amounted to RM4.09 billion compared to RM3.68 billion the year before and RM589.6 million in December 2007.

Financing for personal use stood at RM60.5 billion in December last year, versus RM58.92 billion the year prior and RM7.11 billion in December 2007.

By sector, financing to the real estate industry increased to RM30.25 billion in December 2019 from RM27.71 billion in the same month the previous year. In December 2007, the figure stood at RM1.18 billion.

For the construction sector, total financing in December 2019 dipped to RM34.75 billion from RM35.88 billion in December 2018. The amount financed in December 2007 was RM4.55 billion.

Meanwhile, total impaired financing in December 2019 stood at RM8.82 billion, while total provisions came to RM7.5 billion.

The Islamic Finance Development Indicator report last year revealed that global industry growth dropped to 3% in 2018 versus 7% in 2017, making it the second-slowest expansion after 2014 since the report was first launched in 2012.

The slowdown in 2018 showed downtrend in three industry-leading markets, namely Iran, Saudi Arabia and Malaysia.

The three countries accounted for 65% of global Islamic finance assets in 2018.

However despite the slump, total assets across the industry increased to US$2.52 trillion (RM10.33 trillion) in the same year from US$2.46 trillion in 2017.

Malaysia’s assets grew 5% to US$521 billion in 2018.

Randstad Malaysia’s 2020 Labour Market Outlook said Islamic banking, along with technology sectors, is expected to play a big role in the local economy.

It said Malaysia remains the centre of excellence for the Islamic banking industry and will continue to be a global hub.