Bursa Malaysia Bhd is making a bold move. The chairman, Tan Sri Abdul Wahid Omar, is encouraging financial institutions to explore Islamic banking listings. He made this call despite the lack of shariah-compliant equity instruments in the financial service sector.
Abdul Wahid acknowledged the conventional categorization of financial institutions in Malaysia. Major banks are conventional, but a big part of their businesses is now shariah-compliant. He said, “More than 60 percent of Maybank’s total financing is already shariah-compliant.”
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Bursa Malaysia wants to encourage banks to list their Islamic banking subsidiaries. Abdul Wahid highlighted challenges, such as the operation on a leverage model. The Islamic banking business relies on the current branch network and management team.
He spoke at Invest Shariah Conference 2023, organized by CGS-CIMB Securities Sdn Bhd. There, he noted other issues. The presence of minority shareholders and third-party transactions need examination if banks list Islamic banking subsidiaries separately.
Abdul Wahid emphasized the need to think creatively. Financial institutions must consider other instruments. These instruments would allow trading a part of their equities on the shariah-compliant market.
“We need more shariah-compliant equity instruments in the financial services sector. It’s a collective effort,” he said.
Abdul Wahid has mentioned the need to designate shares as shariah-compliant before. You earmark and ring-fence Islamic banking operations for dividend payment, he added.
He also gave a forecast. The Islamic equities market expects a positive outlook in the second half of 2023. Global interest rates have peaked. Investments will flow from developed markets to emerging markets like Malaysia and other Asean countries. Investors will bolster the shariah-compliant equities and the broader market, he predicted.
Bursa Malaysia’s encouragement marks a potential turning point. It may redefine the landscape of Islamic banking and financial services in Malaysia.
This news is based on The Star.
