The strength of Islamic finance as an industry to weather regional and global shocks can be attributed to its strong foundations rendered by adherence to Shariah principles which promote financing and equity participation to sustain real economy, as well as mutual risk-sharing. During the 2008 Global Financial Crisis, the Islamic banking sector was still able to achieve an annual expansion rate of 16% from 2008 to 20123. By 2013, its collective value was about US$AD1.4 trillion.
Securities Commission (SC) Malaysia Chairman Dato’ Dr. Awang Adek Hussin highlighted Islamic finance’s resilience to regional and global shocks, which is attrbuted to Shariah principles of financing, equity participation, and mutual risk-sharing. He also emphasised the ICM’s role in building a more robust and resilient Malaysian financial system, as well as the SC’s efforts to support Malaysia’s aspirations to develop a dual financial system.
Speaking at the 21st Islamic Financial Stability Forum (IFSF) 2023 in Riyadh, Saudi Arabia today (Aug 15), he congratulated the Islamic Financial Services Board’s (IFSB) on its 20th Anniversary and recognising their role in catalysing greater innovation, standardisation, and resilience within the realm of Islamic finance, highlighting SC’s collaboration with IFSB on its Technical Committee and other initiatives has contributed towards developments of 23 standards, 4 technical notes and 6 guidance notes issued by IFSB to guide regulatory and supervisory authorities in Islamic finance worldwide.
In his speech entitled “Malaysia’s Islamic Capital Market Journey: Challenges, Opportunities and Way Forward,” he said the Islamic finance assets were around US$200 billion at the start of the century. Despite multiple regional and global financial crises, Islamic Finance assets reached an estimated US$3.06 trillion in 2021.
Between 2008 to 2012, volume of global sukuk issuances recorded resounding growth, at a compounded annual growth rate (CAGR) of 41.4%. Meanwhile, the global Islamic Financial Services Industry expanded by 10.7% in 2020 and 11.3% in 2021.
As of 31 December, the Islamic Capital Market (ICM), accounted for 64.5% of the entire capital market, with a total size of US$500 billion. Within the ICM, 46% of the total (USD232 billion) represents market capitalisation of Shariah-compliant securities and 54% is sukuk outstanding (USD268 billion).
The setting up of the Shariah Advisory Council was a major developmental milestone towards harmonising a full-fledged ICM in Malaysia. The future of ICM is about prioritising inclusivity and alignment with ESG requirements. The Sustainable Responsible Investment (SRI) Framework through SRI sukuk and SRI-linked sukuk, are steps in that direction.
“The SC plans to issue a guidance on principle-based Maqasid al-Shariah compliance by the end of the year to meet the need of investors looking for more compliance,” he said.