Firms should be given more flexibility to undertake syariah-compliant trade – PNB

KUALA LUMPUR: Companies should be given more flexibility to trade under the syariah-compliant segment as long as their underlying, basic business abides by the syariah rules in an effort to increase trade finance among Islamic banks, which is relatively low at present.

Permodalan Nasional Bhd (PNB) Group Chairman Tan Sri Abdul Wahid Omar said these companies should be evaluated based on the substance of their business, whether they had largely adhered to syariah rules, in order to increase the number of syariah-compliant companies.

"In our effort to enhance the development of the Islamic capital market, we need to focus on substance (characteristics of business) and not merely form.

"We can see that many companies listed on Bursa Malaysia are actually conducting business that are syariah-compliant. Maybe just a small percentage of non-compliance in terms of loans, income and others,” he told Bernama on the sidelines of the 14th Kuala Lumpur Islamic Finance Forum 2017 here, today.

For Islamic finance to progress, he said there must be a sufficient number of syariah-compliant securities in the market.

"If we could stick to the substance, I think more (syariah-compliant) instruments would be made available to the market," said Abdul Wahid who was a speaker in the first session of the forum titled 'Islamic Finance Smart Talk'.

Abdul Wahid said in Bursa Malaysia, 75% of the listed companies were syariah-compliant, while in terms of market capitalisation, 60% of them adhered to the syariah rules, thus a significant portion of the bourse’s income were syariah-compliant.

“They (Bursa Malaysia) recently introduced the i-platform for syariah-compliant stocks. So, there is an end-to-end syariah-compliant process for those companies.

"We (PNB) want to propose that i-platform is used not only for syariah-compliant companies but also for all listed companies.

“In principle, most of Bursa Malaysia's earnings are derived from syariah-compliant companies. So, why not take an approach to classify Bursa Malaysia a syariah-compliant company," he said.

Themed "Real Finance for Real Economy", the two-day forum, which starts today, gathers professionals, comprising bankers, legal practitioners, regulatory authorities, syariah scholars and academicians to discuss ideas and issues in the world-class Islamic economy.

The forum also serves as a platform for knowledge sharing on Islamic finance, particularly on its sustainability, putting public good ahead of individual gain. — Bernama