Malaysia leads globally with largest sukuk market in 2020

The finance minister says most of the issuances are tied to the principles of SRIs, quoting an MIIFC report


MALAYSIA has topped as the largest sukuk market in 2020 by issuing more than 45% of the world’s outstanding amount or approximately US$258 billion (RM1.06 trillion).

Finance Minister Datuk Seri Utama Tengku Zafrul Tengku Abdul Aziz (picture) quoting report by the Malaysia International Islamic Finance Centre (MIIFC) said most of the issuances are tied to the principles of Sustainable and Responsible Investments (SRIs).

“From funding renewable-energy infrastructures such as solar and hydro, to supporting social purposes, such as micro-financing and education, Malaysian sukuk issuers have acquired an appetite for such ventures, reflecting an increasingly strong commitment towards a sustainable future through Islamic financing products,” he noted in his virtual address during the 16th Kuala Lumpur Islamic Finance Forum yesterday.

The minister added that the data from the stock market and fund management industry also proved that Islamic finance has shown unrelenting resiliency and has continued to attract investors during these uncertain times.

He also noted that the Shariah indices outperformed conventional indices for two consecutive years.

“This has resulted in more demand for Shariah-based investments, with total Islamic assets under management growing from 22% of overall assets in 2017 to 24% by end of 2020 with a total value of RM217 billion,” he said.

On another note, Tengku Zafrul said Malaysia’s Islamic finance penetration rate is on track to reach Bank Negara Malaysia’s target of 40% share of total financing by end of 2020, which is a significant increase from 29% in 2010.

He added that the resiliency of the country’s Islamic finance sector has been proven throughout the Covid-19 pandemic, where its penetration rate increased steadily over the first nine months of 2020.

He highlighted that this was supported by domestic financial institutions’ efforts to expand the sector, coupled with strong growth in household financing.

Meanwhile, the minister also noted that Malaysia will develop an Islamic Finance Hub 2.0 under the Shared Prosperity Vision 2030 (SPV2030).

Under its 15 Key Economic Growth Activities, he said Malaysia is well-positioned to lead globally in this sector.

Other initiatives to push for shared prosperity include the collaboration between the public and private sectors in utilising waqf structures for social purposes.

Additionally, Tengku Zafrul also said the SPV2030 also highlights Malaysia’s potential and plans in tapping the US$3 trillion halal market.

“Malaysia’s firm commitment in promoting the halal industry can be seen in our RM14 billion investments to develop Halal Parks, where halal-oriented businesses will benefit from infrastructure, support services and tax incentives.

“This will not only drive Malaysia’s ambitions to be a global halal hub, but will also help the world become more resilient post- Covid-19 pandemic, guided by the Islamic economy’s core principles of socio-economic and environmental sustainability, as well as social equity, fair trade and ethical consumerism,” he added.

Moving forward, he said the Finance Ministry will be focusing on six priorities this year and hope the Islamic finance industry will show its full support on focus areas such as creating jobs, digitalisation, empowering small and medium enterprises , and accelerating the implementation of specific projects to drive economic recovery.