PETALING JAYA: RAM Ratings expects investment accounts (IAs) to become an important source of new funding for Islamic banks this year as they emerge as potential game-changers in the way Islamic banks source their funds from the public. It noted that unrestricted IAs (UIAs), which are marketed to customers, are estimated to have increased more than RM14 billion in Q4’ 2015, surpassing the RM8.3 billion growth in the overall banking system’s deposits. The recent rapid growth of UIAs follows the requirement of the Islamic Financial Services Act 2013 that Islamic banks distinguish IAs from principal guaranteed deposits by end-June 2015. “We expect some Islamic banks to increasingly focus on promoting UIAs, motivated by the capital savings arising from the regulatory treatment of these products,” RAM’s co-head of Financial Institution Ratings Sophia Lee said in a statement yesterday. Given that the commercial risks of the underlying assets are borne by the IA holders, banks are not required to set aside their own capital to absorb losses from financing funded by IAs. RAM noted that IAs are not insured by Perbadanan Insurans Deposit Malaysia. As compensation for bearing the risk, Islamic banks typically pay higher profit rates to IA holders than depositors. “The higher profit rates are a key factor behind the rapid growth of IAs,” it said. To support the adoption of IAs, Affin Islamic Bank Bhd, Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, Maybank Islamic Bhd, Bank Kerjasama Rakyat Malaysia Bhd and Bank Simpanan Nasional Bhd have formed an online platform – IAP Integrated Sdn Bhd – where investors can find ventures to fund. RAM said the platform provides banks with a new channel to seek funding on behalf of their clients, especially entrepreneurs. RAM’s assessment revealed that UIAs accounted for two-fifths of the RM47 billion of IAs in the Malaysian Islamic banking system as at end-2015. “We note that Maybank Islamic, Bank Islam, Standard Chartered Saadiq Bhd, CIMB Islamic Bank Bhd and AmBank Islamic Bhd had UIAs as at end-September 2015. “To date, Maybank Islamic commands the lion’s share of this market. The remaining IAs comprised restricted IAs (RIAs), the vast majority of which represented placements by parent banks as a form of funding support. RIAs are estimated to have expanded 18% in 2015 (2014 estimate: +36%),” it said. Amid the tighter funding environment, RAM expects parent banks to continue providing funding support to their Islamic banking arms via RIAs.