Malaysia aims to boost Islamic finance with new initiatives in budget

Emblem of Malaysia, the Petronas Twin Towers

Malaysia is hoping new incentives for “ethical” Islamic bonds and home loans will strengthen the country’s sharia-compliant investment market and lure more private players to one of the world’s largest Islamic financial sectors.

The government announced the new incentives in the 2016 budget which was delivered in parliament on Friday, as Prime Minister Najib Razak doled out populist incentives to shore up support.

The government originally introduced the concept of “ethical” sukuk to finance “sustainable and responsible investment” (SRI) in projects such as wind and solar power generation or affordable housing, in 2013.

Sovereign wealth fund Khazanah sold 100 million ringgit ($23.7 million) of SRI sukuk in May this year but so far there have been no other issues in the ethical sukuk market.

In Friday’s budget, Najib said Malaysia would cut taxes on issuance costs of SRI sukuk, and also that sharia-compliant loan instruments would be given a 20 percent stamp duty exemption when they were used to finance home purchases.

Other initiatives for the Islamic finance sector will be announced later, Najib said without elaborating.

Malaysia, with a mostly Muslim population, has been at the forefront of innovation in Islamic finance but has largely relied on state-linked firms to launch new products, while participation from corporations has been sporadic.

Last year, $74.9 billion worth of sukuk were issued from Malaysia, but only $13.5 billion came from corporate issuers, according to data from Zawya, a Thomson Reuters company.

Attracting private sector firms has become more important this year because the central bank has shifted away from selling its own sukuk, causing total global issuance to drop by about 40 percent.

Also, low oil and commodity prices mean Malaysia may be in for years of slower growth, making it harder for Islamic banks and insurers, which remain smaller than their conventional competitors, to invest in developing products and expertise to narrow the gap.

(Writing by Bernardo Vizcaino; Editing by Andrew Torchia and Clelia Oziel)

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.