Islamic banks to face slower financing growth

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KUALA LUMPUR ISLAMIC banks in the country could experience slower financing growth amid lower growth of the economy due to Covid-19 and lower oil prices. The Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) president Datuk Adissadikin Ali said the outlook does not look good as businesses are not performing or even downsizing, so there will be no new job creation and increment will be freeze or employees might have to receive pay cuts. He said in the worst-case situation, it will lead to unpaid leave or layoffs which might contribute to difficulty for people to serve financial obligations or take out new loans. Adissadikin said banks have announced relief measures which should alleviate some pressure on the near-term asset quality and profitability. “While Islamic banks have provided adequate loss-absorption buffers and have stable credit profiles to withstand the current economic challenges, the current situation may have a direct impact to the Islamic banks’ asset quality should it prolong. “Covid-19 outbreak will not just affect the Islamic finance industry, but Malaysia as a whole. The overall impact of the virus on the economy will depend on the duration and spread of the outbreak, as well as policy responses,” he told The Malaysian Reserve.—TMR