Growth of Malaysian Islamic finance to continue

Kuala Lumpur—The strong expansion of Malaysian Islamic finance, which pushed Islamic loan share to 27.9 per cent of system loans at end-1H16, is likely to continue, although at a more modest pace, says Fitch Ratings in a new report.
Malaysia continues to lead the global Islamic finance industry in terms of regulation, standardisation and Sukuk issuance, representing more than half of the world’s issuances at end-1H16. Islamic banks in Malaysia have access to a Shari’ah liquidity facility from the central bank, an active Islamic capital market, interbank money market and secondary market.
The Islamic banking system’s gross impaired loan ratio rose slightly to 1.34 per cent at end-1H16, but remained better than the conventional banking system’s ratio of 1.74 per cent. The Islamic banking system’s core equity Tier one (CET1) ratio of 13.0 per cent was marginally lower than the 13.4 per cent of the aggregate banking system.
Fitch believes a shift in appetite for investment accounts versus Islamic deposits largely reflects the higher yield offered by investment accounts.—Agencies

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