The Malaysian banking sector enjoyed a successful year in 2001. According to the Central Bank of Malaysia's Annual Report, the sector's risk-weighted capital ratio increased to 12.5% (as at end of January 2002) and overall profits amounted to M$7.5 billion (almost $2 billion).
Total Islamic banking assets increased by 25.5% to M$58.9 billion (approximately $15 billion), representing 8.2% of the overall banking system. In terms of profitability, significant growth was recorded with an increase in pre-tax profits by 69.9% to M$905.9 million (approximately $237 million).
By the end of March 2002 the Islamic banking sector's mobilized assets totalled M$59 billion. Mobilized deposits and financing during the same period totalled around M$48 billion and M$30 billion respectively.
These results are in line with the Central Bank's 10-year master plan for the Islamic banking and takaful (Islamic insurance) sector which was unveiled in 2001. The plan envisages that the following objectives will be achieved by 2010:
- the sector will constitute 20% of Malaysia's banking and insurance market and will contribute effectively to the country's economy;
- the sector will be represented by a number of strong and highly capitalized Islamic banking and takaful operators that are capable of offering a comprehensive range of Islamic financial products and services;
- the Islamic banking and takaful operators will be supported and will operate under a comprehensive Syariah and regulatory framework;
- the sector will be supported by a dedicated judicial institution (the Syariah Commercial Court) which will address all relevant legal issues efficiently; and
- the sector will be supported by well-trained and well-educated individuals and management teams with the necessary expertise.
Now Islamic banking in Malaysia is set to expand on a global basis as the Central Bank of Malaysia formulates policies and measures to increase the capacity and capability of Islamic banking players.
For further information on this topic please contact Azlin Azhar at Azmi & Associates by telephone (+603 2145 6161) or by fax (+603 2145 7171) or by email ([email protected]).