KUALA LUMPUR: The Malaysian Islamic finance (IF) industry continues its positive trajectory with total IF assets increasing by 9.5 per cent to reach RM783 billion, which also represent 28.8 per cent of the country’s total banking assets for the first seven months of this year.
The segment’s total financing also rose by 12 per cent to RM578.4 billion, accounting for 34.2 per cent of total loans in the banking system, according to the Economic Report 2017/2018.
The growth in total financing was supported by increase in disbursements to businesses at 16.3 per cent and households 9.4 per cent. More than half of the total financing was extended to the households sector totalling RM349.5 billion as of July 2017.
This was followed by the finance, insurance business services and real estate sector, accounting for 11.2 per cent (RM64.6 billion), construction sector at 4.8 per cent (RM27.9 billion).
Malaysia also remains at the forefront of IF innovation with the establishment of the Investment Account Platform (IAP), which utilises financial technology (fintech) to provide efficient intermediation to customers back in February 2016.
The types of businesses listed on the IAP are diverse ranging from cooperatives to small and medium enterprises (SMEs) and are primarily used to raise working capital or project financing, said the report.
Financing raised via the AIP in the first half had tripled to RM72 million, in comparison to RM20 million recorded in the first half of 2016.
The Shariah non-compliance risk in Malaysia IF sector is also relatively low given various safeguards to mitigate such risk from Bank Negara.