I received sad news today. A very close associate in the office is leaving for Singapore. He has been my point of reference for Shariah compliance issues for the past 2 years and his loss will be deeply felt.
Another thing is – he’s leaving not only for a competitor bank but also a competitor country. Singapore (and Hong Kong) have been trying to join the Islamic banking bandwagon for quite sometime now and doing everything possible to gain a foothold.
The Monetary Authority of Singapore (MAS) has drawn up a guideline on the application of banking regulations to Islamic banking and Hong Kong Monetary Authority (HKMA) has agreed to review tax laws to accommodate IBF transactions.
Malaysia has responded quite positively to the threats posed by these other jurisdictions by announcing that more Islamic banking licence will be given out to foreign Islamic banks including the setting up of a mega Islamic bank out of KL. This is a good step to strengthen KL’s foothold of the industry but Singapore and Hong Kong are traditionally centres of finance and they have the global presence and appeal that KL lacks. Hong Kong has the additional advantage of being one of the entry points to the still expanding Chinese market.
There is also this on-going debate about the Malaysian Shariah standards being less stringent as compared to that of the Gulf. The global market tends to look at the Gulf as the standard for Shariah compliance and as long as Malaysia is adamant on promoting its brand of Shariah standards, it may lose out especially when Singapore and Hong Kong are adopting the Gulf (read global) standards.
So, how does KL counter all these threats? For a start maybe it should start adopting the Gulf standard of Shariah compliance (in all fairness, Malaysia has done quite a bit to standardise the standards). Producing capable Islamic banking professionals, especially true Islamic bankers who were never conventional bankers is crucial to ensure quality IBF solutions are structured. Instead of setting up Islamic subsidiaries, why not convert existing conventional banks into Islamic banks and thus having the size right from the start. And of course, continuous public education on the merits of IBF should be pursued rigorously.
Despite its 1400 year track record, IBF is still a relative young and developing science. There is still a lot of room to improve and a lot of untapped markets to explore. It is still anyone’s game.
Another thing is – he’s leaving not only for a competitor bank but also a competitor country. Singapore (and Hong Kong) have been trying to join the Islamic banking bandwagon for quite sometime now and doing everything possible to gain a foothold.
The Monetary Authority of Singapore (MAS) has drawn up a guideline on the application of banking regulations to Islamic banking and Hong Kong Monetary Authority (HKMA) has agreed to review tax laws to accommodate IBF transactions.
Malaysia has responded quite positively to the threats posed by these other jurisdictions by announcing that more Islamic banking licence will be given out to foreign Islamic banks including the setting up of a mega Islamic bank out of KL. This is a good step to strengthen KL’s foothold of the industry but Singapore and Hong Kong are traditionally centres of finance and they have the global presence and appeal that KL lacks. Hong Kong has the additional advantage of being one of the entry points to the still expanding Chinese market.
There is also this on-going debate about the Malaysian Shariah standards being less stringent as compared to that of the Gulf. The global market tends to look at the Gulf as the standard for Shariah compliance and as long as Malaysia is adamant on promoting its brand of Shariah standards, it may lose out especially when Singapore and Hong Kong are adopting the Gulf (read global) standards.
So, how does KL counter all these threats? For a start maybe it should start adopting the Gulf standard of Shariah compliance (in all fairness, Malaysia has done quite a bit to standardise the standards). Producing capable Islamic banking professionals, especially true Islamic bankers who were never conventional bankers is crucial to ensure quality IBF solutions are structured. Instead of setting up Islamic subsidiaries, why not convert existing conventional banks into Islamic banks and thus having the size right from the start. And of course, continuous public education on the merits of IBF should be pursued rigorously.
Despite its 1400 year track record, IBF is still a relative young and developing science. There is still a lot of room to improve and a lot of untapped markets to explore. It is still anyone’s game.
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