Islamic Financial Services

As a result of government promotion, increased interest among Muslims and non-Muslims, heightened awareness of the benefits of Islamic finance and improved regulation, sharia-compliant financial products have been gaining on conventional finance. The country’s IFS sector dates back to 1969, when the government established the Pilgrims Management and Fund Board to help Malaysians pay for the Hajj. According to recent estimates, around half of all outstanding debt securities are sharia compliant, with the annual trading volume of the IFS market reaching $312.1bn. The 2013 Islamic Financial Services Act will improve regulation and supervision in the sector by giving the central bank the power to intervene in financial institutions’ operations if it feels they are endangering the financial system. The IFS sector will no doubt continue to expand rapidly. Regulation may create new challenges for some business in the sector, but it will also increase confidence in and understanding of IFS. Once the sector digests these new rules, it will likely come back stronger and in a better position to take on a larger share of conventional financial services. This chapter contains interviews with Rauf Rashid, Country Managing Partner, EY Malaysia; and Daud Vicary Abdullah, President and CEO, INCEIF.