Islamic banking industry is prospering in Malaysia as it successfully withstood the financial crisis that challenged the basic principles of traditional banking.
Islamic finance industry remains optimistic on the healthy growth prospects and positive outlook of the Islamic banking sector of Malaysia, reported The Star.
Of Malaysia's total banking assets in the local financial system, Islamic banking assets accounted for a share of 17.4%, whereas in the bond market, 57% share of the total market was held by the sukuk market as of the end of 2008.
With 17 standalone Islamic banks and the prospering Islamic financial industry, Malaysia is set to become one of the major financial hubs in the world.
The prime factor assisting the growth of the Islamic banking sector is that these banks have well resisted the recent crisis in the banking industry across the world prompted by subprime mortgage crunch, as their rules restrict dealings in products like options, derivatives or papers which caused the meltdown.
The strength of the Islamic banking sector can be better acknowledged from the fact that when the financial institutions in the developed world are waiting for big state assistance, Islamic banking institutions in there, such as the European Islamic Bank in the UK remained unharmed from the turmoil.
Liberalization of Malaysia's financial sector that increases upto 70% foreign equity ownership in Islamic banks, insurance firms and investment banks is expected to lead the sector to observe further stimulus.
In the meantime, foreign banks operating in the country are too engaged in developing products as well as services in order to cash in on the surging market. Most probably, the next stage of growth in foreign banking territory would be Islamic banking industry.
According to a Research Analyst at RNCOS, "The recent financial turmoil witnessed by the world unveiled the vulnerabilities in the traditional banking system and displayed that Islamic banks are far much safer as they do not include risky product offerings. Over the past few years, Islamic banking sector has been going through its expansion phase and on account of increasing Islamic population and rising awareness, it is expected to continue its growth in future also."
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