KUALA LUMPUR: The Islamic financial market is expected to remain vibrant with the Islamic banking and Islamic capital market continued to be resilient to complement economic recovery.
The Finance Ministry (MoF), in its Economic Outlook 2022 report released today, said the positive outlook will be underpinned by the Capital Market Master Plan 3 (CMP3) and Blueprint 3.0 initiatives, ongoing stimulus measures, infrastructure projects and future strategic projects under the 12th Malaysia Plan (12MP).
"The lifting of containment measures of the pandemic and eventual reopening of all economic sectors bodes well for overall market performance.
"However, downside risks, which include the reimposition of stringent containment measures, weaker than expected global growth recovery and faster-than-expected pace of policy normalisation by major central banks, persist," the report said.
Thus, the MoF said various measures will be undertaken to ensure the market remained dynamic, orderly and resilient which include accelerating value-based intermediation (VBI) principles, enhancing the focus on halal economy and emphasising digital solutions development.
It said attention will also be given to promoting environmental, social, and governance (ESG) investments, supporting the transition towards a low-carbon nation status, adopting international best practices and improving governance.
On the sector performance, it said the Islamic banking sector remained robust despite experiencing challenges from the more stringent implementation of the Movement Control Order (MCO) following the resurgent of Covid-19 cases.
As of end-July 2021, total Islamic banking assets expanded by 9.1 per cent to RM1,132.5 billion, constituting 34.8 per cent total market share.
Similarly, total Islamic financing outstanding increased further by 5.6 per cent to RM831.6 billion, with financing to the household sector accounting for 64.5 per cent of total financing, mainly for the purchase of residential properties and passenger cars.
"The demand in the household sector remained strong, supported by various stimulus packages and reopening of all economic sectors through the ramp-up of mass vaccination," the MoF noted.
On the other hand, it said to continue empowering and building the social resilience of businesses, Islamic financial institutions had piloted several initiatives such as blended finance and liquidity facility for small and medium enterprises under the current economic condition.
For the Islamic capital market (ICM), the MoF said it also continued to gain traction in Malaysia and as of end-July 2021, the domestic size ICM was valued at RM2,254 billion, accounting for 65.7 per cent of RM3,433 of Malaysia's total market.
Meanwhile, during the seven months of 2021, sukuk issuance amounted to RM151.3 billion or 66 per cent of total bond issuance while sukuk outstanding stood at RM1,080 billion or 63.5 per cent of total bonds outstanding as at end-July 2021, it said.
The MoF said shariah-compliant securities also continued to generate interest with 748 (79.1 per cent) of 946 public-listed companies adhering to shariah principles.
As at end-July 2021, the market capitalisation of Shariah-compliant securities stood at RM1,173.9 billion or 67.8 per cent of overall market capitalisation.
Moving forward, the MoF said the Islamic financial industry will play a facilitative role in accelerating the post-pandemic recovery.
"This is driven by the ability of Islamic finance principles to integrate with ESG elements, supportive regulatory environment and continuous efforts to promote Shariah-compliant products.
"Furthermore, product development will also be enhanced to meet the needs of stakeholders from various sectors. One of these areas includes financing for the halal sector and Shariah-compliant Sustainable and Responsible Investment (SRI)," it added. - BERNAMA