Islamic bank financing is expected to grow to nearly 50 per cent of Malaysia’s total bank financing over the next ten years, said S&P Global Ratings. — Picture by Yusof Mat Isa
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Tuesday, 16 Jul 2024 7:30 PM MYT
KUALA LUMPUR, July 16 — Islamic bank financing is expected to grow to nearly 50 per cent of Malaysia’s total bank financing over the next ten years, said S&P Global Ratings.
Its financial institutions ratings director, Nikita Anand, said Malaysian Islamic finance is promising, with strong growth anticipated over the next five to ten years.
“Our expectation is an eight per cent growth yearly in Islamic financing, which is double that of the sector level.
“Most of the growth is coming from Islamic banks rather than conventional banks at this point, given the robust demand for Sharia-compliant products and services. Most large banks have an Islamic strategy where they offer Sharia-compliant products first,” she said during the S&P Global Rating’s webinar on Asia-Pacific Islamic Banks and Sukuk Market Insights today.
Nikita said that Islamic finance in Malaysia includes many tax incentives.
“For environmental, social, and governance (ESG) financing, there are also regulatory incentives that should increase the issuance of sustainability-linked instruments.
“These incentives include tax deductions until 2025 and grants provided to cover external review costs for ESG financing,” she said.
Nikita added that most large Malaysian banks have ESG targets in place to be achieved by 2025-2026.
“Many of these targets aim for around 10 to 11 per cent of their total loan and financing portfolio.
“This financing goes to priority sectors, with SMEs being the largest recipients. Additionally, a significant amount of financing is going towards renewable energy and green buildings,” she said.
Similarly, Nikita said that the Malaysian sukuk market has been quite resilient and robust in the domestic context over the last year and a half and is likely to remain so.
“The Malaysian sukuk market is quite broad and deep. A large variety of issuers have access and are able to raise funds regularly at very competitive rates over a long period.
“There is a lot of support from the authorities, which has helped Malaysia develop such a deep, vibrant financing ecosystem,” she added. — Bernama
