More listed Islamic financial firms needed

KUALA LUMPUR: The listing of more Islamic financial institutions on Bursa Malaysia is needed to boost the Islamic fund and wealth management industry.

Permodalan Nasional Bhd group chairman Tan Sri Abdul Wahid Omar said this would also strengthen Malaysia’s position as a global hub for such funds.

He said of the 672 syariah-compliant securities listed on the local bourse, only two were from the finance sector, namely BIMB Holdings and Syarikat Takaful Malaysia.

“The finance sector has thus the lowest number of syariah compliant listed securities available. It also places the percentage of syariah compliant securities under the sector at only 6%,” he told the International Islamic Fund and Wealth Management Forum yesterday.

Wahid said the shortage could pose big challenges to the industry, especially for Government Linked Investment Companies such as PNB, Lembaga Tabung Haji and Kumpulan Simpanan Pekerja, as they are expected to provide syariah-compliant dividends to Muslim investors.

As such, it is impossible to provide a competitive return if GLICs have to avoid investing in the financial sector, since there are only 6% of syariah compliant securities listed on Bursa Malaysia, he added.

He also suggested three possible ways to further grow the industry.

The first is the formation of a second listed Islamic universal banking group, apart from BIMB Holdings, which could be anchored by Malaysia Building Society Bhd (MBSB), Bank Muamalat Malaysia Bhd, Malaysia Industrial Development Finance Bhd (MIDF) or one of the larger foreign-owned Islamic banks.

The listing of some of Islamic development finance institutions such as Bank Simpanan Nasional and Bank Rakyat is a second option.

The third approach is the creation of a separate listing of “Islamic” or “i-share” among banking groups that have sizeable Islamic finance activities embedded within them such as Maybank, CIMB and RHB.

“For example, up to 25% of Maybank’s profit is derived from Islamic finance.

“Since Maybank Islamic is a wholly owned subsidiary and an integral part of Maybank, we can designate say 20% of the latter’s shares as Islamic shares via some ring fencing arrangements,” he explained.

Abdul Wahid said based on Maybank’s market capitalisation of RM97 billion, this initiative would create a new class of syariah compliant investment instruments worth RM19 billion.

“Of course this will require a lot of consultation with the Securities Commission, Bank Negara Malaysia, and Bursa Malaysia. With positive thinking in trying to solve a problem, I believe we can come up with the right solutions,” he later said at a press conference. – Bernama