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Tapping potential of Islamic finance

ISLAMIC finance is a fast-rising star and the world’s financial centres are already  staking claims to this growing segment of the market.

Sultan of Perak Sultan Nazrin Muizzuddin Shah said by all accounts, Asia, particularly East Asia and Southeast Asia, could well send Islamic financing, asset creation and asset management services soaring to the next level.

“Asia is witnessing unparallelled rates of wealth creation and by the end of this year, the number of high net worth individuals in the region is expected to surpass those in North America and Europe,” Sultan Nazrin said in his keynote address at the 11th Kuala Lumpur Islamic Finance Forum, here, yesterday.

Looking forward, he said the outlook was even more encouraging, with the region expected to contribute more than 50 per cent to global growth by 2018.

On average, the region is expected to grow almost twice as fast as the rest of the world over the next decade and Asia’s expanding middle class population will be a vital growth driver.

The Organisation for Economic and Cooperation Development (OECD) projects Asia will account for 66 per cent of global middle-class consumption by 2030, rising more than six times to 3.2 billion people from 525 million in 2009.

Combined with high savings rates and rising wages, there is significant long-term potential for the expansion of consumption.

Sultan Nazrin said closer to home, Asean was a rapidly growing region with a population of more than 600 million people, which is half that of China and twice that of the United States, and with total gross domestic product (GDP) of US$2.3 trillion (RM7.4 trillion).

The OECD projects the region’s GDP growth at 5.5 per cent per annum through 2017.

Asean financing requirements for at least the next two decades will be considerable, where the Asian Development Bank estimates it at US$60 billion a year to 2016 and beyond.

He said Indonesia had vast untapped potential, with Islamic banks accounting for only five per cent of all banking assets.

China’s 60 million Muslims are also widely tipped by industry observers as another source of growth.

All this bodes  well for the growth of the industry in the coming decades and with more sovereign and quasi sovereign investees, financial institutions will have their hands full providing a whole range of services 

“We should continually remind ourselves that new challenges demand new mindsets and responses, and we must continue to be innovative and competitive so that we stay ahead of the game.

“As we do this, we must continue to strengthen our financial institutions so as to be able to deal with the uncertainties that lie ahead.”

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