Malaysia as a Hub for Islamic Wealth Management

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1

Malaysia as a Hub for Islamic Wealth Management

THE INTERNATIONAL FINANCIAL PLANNING
ADVISORS CONFERENCE 2008

Mohd Willieuddin Lim

Director, Global Markets


Sunway Pyramid Convention Center

22
-
24 February 2008

2

Contents



Section

1



History

of

Islamic

Finance

Industry



3

Section

2



The

Shape

of

the

Modern

Industry



5

Section

3


Islamic

Wealth

Management




8

Section

4


Why

Islamic

Wealth

Management



12

Section

5


Malaysia

as

a

Hub




24

Section

6


Opportunities

&

Issues




33

Section

7




Conclusion



Important

Notice




3

History of Islamic Finance Industry

4


A

comprehensive

financial

system

that

adheres

to

Islamic

principles
;


It

was

the

financial

system

of

the

known

world

developed

under

the

reign

of

the

Muawiyad

and

the

Abbasid

Empires

from

the

year

661

until

the

year

850
;


It

continued

to

be

a

vibrant

and

significant

financial

system

of

the

known

world

spearheaded

by

great

Islamic

empires

in

Andalusia

(Spain)

until

the

year

1031
,

in

Granada

until

the

year

1492
,

in

the

Malaccan

Sultanate

(
1511
)

and

in

the

Ottoman

(Turkey)

until

the

year

1918
;



It

is

a

system

which

has

existed

for

the

last

1
,
426

years
.

We

are

only

relearning

what

is

available

under

the

system

in

the

last

40

years
.


Broadly

refers

to

financial

market

transactions,

operations

and

services

that

comply

with

Islamic

rules,

principles

and

codes

of

practices
.

The

laws

and

rules

of

the

religion

require

certain

types

of

activities,

risks

or

rewards

to

be

either

prohibited

or

promoted
.

The Islamic Financial Industry is……

Islamic Capital Market


A Tradition

5

Islamic Financial Market


The Evolution…

The

evolution

of

Islamic

Financial

market

is

contributed

by

introduction

of

a

competitive

and

comprehensive

product

and

service

offerings
.

2005+


Commercial
Banking


Project Finance
Syndications


Equity and funds


Ijarah


Sukuk


Structured
alternative assets


Liquidity
management tools

2000’s


Commercial
Banking


Project Finance
Syndications


Equity and funds


Ijarah


Sukuk


Structured
alternative assets

1990’s


Commercial
Banking


Project Finance
Syndications


Equity and funds


Ijarah

1980’s


Commercial
Banking


Project Finance
Syndications

1970’s


Commercial
Banking

6


The

world

Muslim

population

today

is

estimated

at

about

1
.
8

billion,

representing

a

sizeable

28
%

of

total

world

population

of

6
.
6
.

billion
.


Islamic

banking

and

finance

has

become

a

force

to

be

reckoned

with

in

the

global

economic

scenario
.

It

often

forms

part

of

the

equation

in

international

finance,

whether

on

a

government

to

government

basis

or

at

the

private

sector

levels
.


The

global

Islamic

banking

sector

is

growing

at

an

average

of

15
%
-
20
%

per

annum
.


Currently,

there

are

300

Islamic

financial

institutions

operating

in

about

100

countries

worldwide
;

with

more

than

300

Islamic

equity

funds

managing

assets

in

excess

of

USD
5

billion
.







Source
:

Bursa

Malaysia/LFX

Islamic

Capital

/

Market

Report


Modern Day Industry Facts & Figures

7


Total

assets

of

the

Islamic

banking

sector

now

stands

at

USD
750

billion

and

will

reach

USD
1

trillion

by

2010
.

(McKinsey)


Size

of

Islamic

mutual

funds

assets

are

estimated

at

USD
800

billion
.

Where

USD
50
-
70

billion

are

in

actively

managed

products
.

(Eurekahedge,

Key

Trends

in

Islamic

Funds,

2006
)


Global

sukuk

market

(USD

plus

RM

issuance)

is

now

over

USD
92

billion
.

USD

issuance

of

sukuk

amounts

to

USD

22
.
85

billion

as

at

end

2007
.


Global

market

capitalization

of

Dow

Jones

Islamic

Index

>

USD
10

trillion
.


Private

capital

investments,

especially

among

Middle

East’s

high

net

worth

individuals

whom

are

predominantly

Muslim,

is

estimated

to

reach

USD
1
.
5

trillion

and

reaching

USD
2

trillion

by

2010
.


Islamic

finance

is

recognized

as

having

growth

potential

in

established

conventional

financial

centers
.

The

market

is

expected

to

grow

to

USD

3
-
4

trillion

in

the

next

4
-
5

years
.





Source: Malaysia International Islamic Financial Centre, October 2006 Report


Modern Day Industry Facts & Figures (continued)

8

The Shape of the Modern Industry

9

The Modern Islamic Financial Market

Islamic
Financial
Market

Wealth
Management

Banking

Non
-
Financial
Institutions
Services

Money Market

Capital Market
Debt and Equity

Asset
Management

Takaful

Structured
Products and
Derivatives

Industry must be comprehensive with all critical components established

10

Global Development of the Islamic Capital Market in the Last 30 Years

Area

1970s

1980s

1990s

2000s

Evolution

Institutions

Products


Gulf / Middle East


Commercial Islamic


banks



Commercial banking


products



Gulf / Middle East


Asia Pacific


Commercial Islamic


banks


Takaful


Islamic investment


companies


Commercial banking


products


Takaful products


Gulf / Middle East


Asia Pacific


Commercial Islamic


banks


Takaful


Islamic investment


companies


Asset management


companies


Brokers/Dealers



Commercial banking


products


Takaful products


Mutual funds/ unit


trust


Domestic Islamic


bonds


Shariah compliant


stocks


Islamic stock broking


Islamic derivatives


Gulf / Middle East


Asia Pacific


Europe / Americas


Global Offshore Market


Commercial Islamic banks


Takaful


Islamic investment companies


Asset management companies


Brokers/dealers


Islamic investment banks


E
-
Commerce



Commercial banking products


Takaful products


Mutual funds/ unit trust


Domestic Islamic bonds


Global Islamic bonds


Islamic asset backed securities


Shariah compliant stocks


Islamic stock broking


Islamic derivatives


Hedge funds


Private Equity & Islamic REITs

(Source: Report of the Islamic Capital Market Task Force of the International Organization of Securities Commission (“IOSCO”)

an
d CIMB Islamic Analysis)

11

Strategic Landscape For International Growth

EUROPE

LUXEMBOURG

UK

SWITZERLAND

DENMARK

ALBANIA

GERMANY

TURKEY

RUSSIA

AFRICA

TUNISIA

SENEGAL

SUDAN

EGYPT

GHANA

ALGERIA

SOUTH AFRICA

GAMBIA

ASIA

KUWAIT

PHILIPPINES

BRUNEI

SINGAPORE

MALAYSIA

INDONESIA

IRAN

JORDAN

QATAR

PAKISTAN

BANGLADESH

SAUDI ARABIA

UAE

BAHRAIN

INDIA

THAILAND

IRAQ

NIGERIA

AUSTRALIA

US

SRILANKA

OMAN

TAKAFUL ONLY

ISLAMIC BANK ONLY

ISLAMIC BANK & TAKAFUL

LEBANON

TRINIDAD & TOBAGO

AMERICAS

OCEANIA

EUROPE

LUXEMBOURG

UK

SWITZERLAND

DENMARK

ALBANIA

GERMANY

TURKEY

RUSSIA

AFRICA

TUNISIA

SENEGAL

SUDAN

EGYPT

GHANA

ALGERIA

SOUTH AFRICA

GAMBIA

ASIA

KUWAIT

PHILIPPINES

BRUNEI

SINGAPORE

MALAYSIA

INDONESIA

IRAN

JORDAN

QATAR

PAKISTAN

BANGLADESH

SAUDI ARABIA

UAE

BAHRAIN

INDIA

THAILAND

IRAQ

NIGERIA

AUSTRALIA

US

SRILANKA

OMAN

TAKAFUL ONLY

ISLAMIC BANK ONLY

ISLAMIC BANK & TAKAFUL

LEBANON

TRINIDAD & TOBAGO

AMERICAS

OCEANIA

COMPREHEMSIVE ISLAMIC FINANCIAL MARKET
-

MONEY MARKET, DEBT & EQUITY CAPITAL MARKET, FUNDS, ETC

Geographical

spread

of

countries

that

offer

Islamic

Banking

and

Takaful

products

and

services

12

Islamic Wealth Management

13

What is Islamic Wealth Management ?


The WM Cycle

Source: CIMB PB

Wealth Creation

Wealth Enhancement

Wealth Protection

Wealth Distribution

From business, savings in
bank, investment in first
property, etc.

Enhancing total returns
from capital gains and
income, including via use of
leverage

Capital preservations, risk
management, insurance, trusts

Passing on assets through
wills and trusts


Islamic Wealth Management is concerned with providing end
-
to
-
end solutions using products
and services throughout the wealth management cycle in compliance with Shariah. It’s a
Shariah
-
based service.

14

What does it take to have a good Islamic Wealth Management Hub

To

become

the

focal

point

for

Islamic

Wealth

Management

an

Islamic

Finance

centre

would


Have

developed

to

a

level

where

demand

for

management

of

assets

in

accordance

to

the

rules

of

Shariah

has

grown

beyond

fulfilling

basic

safekeeping

to

generating

productive

returns


Have

a

track

record

of

market

leadership

and

product

innovation


Have

a

supportive

regulatory

and

legal

framework


How

does

Malaysia

measure

up

against

these

criteria?



15


Industry players of reasonable size and economies of scale undertaking
multitude of Islamic financial activities.


Availability of products for multiple customer segments.






Diversified Players


Islamic Banks


Investment Banks


Takaful companies


Development Financial
Institutions


Fund Management companies


Stockbroking companies

Widest Product Range


In terms of products and
services, there are more than
100 Islamic financial
products and services
ranging from deposit,
financing, treasury/money
market investment, trade
financing, card services and
banking services offered by
the financial institutions

Diversified products and players

16


Introduction and amendment of key legislation has been a key contributor
to development of Islamic banking and the sukuk.


Malaysia has the most comprehensive regulatory framework for Islamic
Finance and includes….








Shariah is regulated by the central bank. Industry as a whole is 100%
Shariah compliant not just on product basis.


Banking

Laws

(eg
.

Islamic

Banking

Act

1983

(“IBA”))


Securities

Laws

(eg
.

Guidelines

on

the

Offering

of

Islamic

Securities

2004

(“IS”))


Shariah

requirements

(incorporated

in

IBA

and

IS)

+

Guidelines

on

Shariah

Committee

Management

Key Governing Laws


Land

laws


Securities

laws

i
.
e
.

merger/takeover,

beneficial

ownership


Lease

laws

(Ijara

transaction)


Tax/Stamp

duty

legislation


Company

law


Others

“Accidental” Governing Laws

Proper and effective regulatory framework

17

Malaysia

Has

The

Most

Comprehensive

Regulatory

Framework

for

Islamic

Finance

and

includes

the

following



Enactment

of

Islamic

Banking

Act

1983


Enactment

of

Government

Investment

Act

1983


Enactment

of

Takaful

Act

1984


Amendments

to

Banking

and

Financial

Institutions

Act

1989


Enactment

of

Labuan

Offshore

Laws

1990


Guidelines

on

the

Offering

of

Islamic

Securities

2004


Guidelines

on

the

Management

of

Shariah

Committees



Guidelines

for

Islamic

Real

Estate

Investment

Trusts

2005


Guidelines

on

Islamic

Fund

Management

2007

Amendments

and

revisions

on

the

relevant

regulatory

framework

continuously

being

made

to

cater

the

ongoing

developments

of

Islamic

financial

market

18

Why Islamic Wealth Management?

19

The Obligation


The

Quran

:

on

the

Prohibition

of

Riba’

or

usury


Al
-
Baqarah

Verse

275



...
Allah

has

permitted

trades

and

prohibited

riba’
/usury
...



Al
-
Baqarah

Verses

278

-

279

“O

you

who

believe!

Fear

Allah

and

give

up

what

remains

of

your


demand

of

usury,

if

you

are

indeed

the

believers
.

If

you

do

not

do

it,

take

notice

of

War

from

Allah

and

His

Messenger
:

but

if

you

turn

back,

you

shall

have

the

capital

sums
;

deal

not

unjustly,

and

you

shall

not

be

dealt

with

unjustly
.



O

ye

who

believe!

Devour

not

usury,

doubling

and

quadrupling

(the

sum

lent)
.

Observe

your

duty

to

Allah

that

you

may

be

successful
.

(Qur’an,

3
:
130
)



20

The Obligation



“Shariah

defines

five

necessities

as

necessary

and

basic

for

human

existence
.

It

is

the

duty

of

every

society

to

preserve

and

protect

the

five

necessities
;

other

wise

human

life

would

be

harsh,

brutal,

poor

and

miserable

here

and

in

the

hereafter”
.

(Islamic

Divine

Law

(Shariah),

The

Objectives

of

The

Islamic

Divine

Law



Mashhad

Al

Allaf)


The

five

necessities

are


Religion

(Deen),



Life

(Nafs)


Intellect

(Aqal)


Progeny

(Nasal)



Property

(Maal)


Hence

the

need

to

manage

wealth

in

accordance

to

Shariah
.

21


The Market Trend

-

Latent Demand in Malaysia


There

are

increasing

numbers

of

discerning

Muslims

more

concerned

with

how

their

monies

are

spent

&

kept
.

An

indicator

is

the

trend

of

zakat

(tithe

payment
.


Zakat

collections

between

1996

and

2005

have

been

growing

at

a

CAGR

of

15
%

p
.
a
.


By

end

2006

it

is

estimated

that

zakat

collections

reached

some

RM
600

million



Zakat

on

personal

income

and

zakat

on

savings

represents

some

71
%

of

zakat

collected
;

approximately

50
%

of

zakat

collected

is

by

way

salary

deduction
.

0
100
200
300
400
500
600
700
Millions
1996
1998
2000
2002
2004
2006f
Year
Zakat Collection in Malaysia
Source PPZ and CIMB Islamic

22

The Market Trend


Growing Islamic Banking An Indicator of Growing
Wealth


Islamic

banking

has

been

a

key

contributor

to

growth

in

the

financial

markets


It

is

estimated

that

at

end

2007
,

USD
34

billion

assets

are

held

in

Islamic

banking

representing

13
%

of

total

financial

assets
.

(BNM)


The

bulk

of

deposits

is

predominantly

in

investment

and

savings

type

whereas

financing

is

mainly

disbursed

for

purposes

of

home

and

auto

purchases

a

clear

indicator

that

affluence

of

Islamic

banking

population

is

growing
.


Islamic

banking

Approximately

70
%

of

Islamic

banking

customers

are

non
-
Muslims
.


Islamic Banking Statistics (RM ' BIL)
120.99
98.58
76.84
47.01
59.35
68.07
82.22
94.99
111.82
117.45
35.92
47.11
53.18
60.21
72.86
83.87
86.22
20.82
28.32
36.72
48.62
57.84
67.36
69.82
0
20
40
60
80
100
120
140
2000
2001
2002
2003
2004
2005
2006
2007
Year
Total Asset
Total Deposit
Total Financing
23

Market trend
-

The Need for Planning.


Estate

planning

is

becoming

increasingly

important

to

address

generational

wealth

transfer
.

In

Malaysia

as

at

July

2006

there

is

an

estimated

RM
38

billion

worth

of

inheritance

assets

that

have

failed

to

be

distributed

due

to

improper

estate

planning
.

A

vast

proportion

of

this

has

been

classed

as

assets

belonging

to

Muslims
.

Thus,

there

is

a

need

for

proper

planning

to

administer

one’s

assets
.

In

Islam,

the

virtues

of

planning

are

revealed

in

Verse

47

of

Surah

Yusuf


“For

seven

consecutive

years,

you

shall

sow

as

usual

and

that

(the

harvest)

which

you

reap

you

shall

leave

in

ears,

(all)
-
except

a

little

of

which

you

may

eat
.


24

Malaysia as an Islamic Wealth Management Hub

25

(Source: Bursa Malaysia, Securities Commission)

* 2007 figures Number of Companies as at Nov 07, Market Cap as at end Dec 07

By

Nov

2007
,

86
%

of

Bursa

Malaysia

comprises

of

shariah

compliant

stocks


Market

capitalisation

of

shariah

compliant

stocks

accounted

for

RM
705
.
05

billion

or

63
.
74
%

of

total

domestic

market

capitalisation

as

at

December

2007

Compared

to

the

developing

GCC

&

MENA

stock

markets,

Bursa

Malaysia

provides

more

choice

in

terms

of

sectoral

opportunities

thereby

providing

better

risk

diversification

Top 10 Companies % of Total Market Capitalization

China
UK
US
Malaysia
Bahrain
UAE
Saudi
0%
20%
40%
60%
80%
100%
(Source: Bursa Malaysia,

E&Y Islamic Funds and Investment Report 2007)

544
585
636
677
699
778
855
886
853
0
100
200
300
400
500
600
700
800
900
1000
1999
2000
2001
2002
2003
2004
2005
2006
2007*
0
100
200
300
400
500
600
700
800
Billions
Total Listed Companies
Market Valuation
Size of Malaysia’s Equity Market

Malaysia: A Global Islamic Capital Market

26

(Source: The Islamic Capital Market Task Force (IOSCO) Report, ISI Emerging Markets, Bloomberg)

Malaysia
90%
Qatar
3%
Indonesia
0%
Others
1%
Saudi Arabia
2%
Bahrain
4%
As

at

December

2003

As

at

December

2007

UAE
8.54%
Caymans
7.67%
Jersey
5.97%
Others
3.84%
Saudi Arabia
8.18%
Malaysia
65.80%

As

of

December

2007
,

approximately

66
%

of

new

Islamic

fixed

income

securities

globally

were

issued

in

Malaysia
.

The

remaining

global

issues

are

from

the

Middle

East

/

GCC

and

offshore

jurisdictions
.


Recent

experience

has

shown

that

products

with

more

global

features

attract

more

investment

from

abroad

vis

USD

denominated

sukuks

Malaysia: A Global Islamic Capital Market

27



95
105
115
125
135
145
155
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Islamic
Conventional
Ringgit Bonds with maturities of 1
-
year and above

95
105
115
125
135
145
155
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Islamic
Conventional
Ringgit Bonds with maturities of 5
-
years and above

Index reading

Av. Annualized Returns

Average Duration

Islamic

Conventional

Islamic

Conventional

Islamic

Conventional

1
-
year

and

above

145.47

138.35

7.64%

6.27%

4.73

3.98

5
-
years

and

above

142.07

125.43

7.57%

4.39%

6.32

6.11

(Source: CIMB Fixed Income Research)

Islamic Papers have always Outperformed Conventional Papers in Malaysia

28

Leading in Islamic Asset Management

No. of Shariah Funds vs Conventional Funds
55
71
83
100
134
171
229
257
316
387
0
100
200
300
400
500
600
2003
2004
2005
2006
2007
Year
No. of Funds
Shariah-based
Conventional
Shariah-based Unit Trust Funds
16.90
4.75
6.76
8.49
9.17
7.5
9.98
8.6
7.7
6.8
0
2
4
6
8
10
12
14
16
18
2003
2004
2005
2006
2007
Year
NAV (RM billion)
0
2
4
6
8
10
12
(%)
NAV
% to Total Industry
Malaysia has some 134 funds at the end of 2007 and is estimated to account for 22% of Islamic funds
worldwide (Securities Commission, Eurekahedge)

Fund assets have been growing at a CAGR of
38% per annum between 1997 and 2007.

The total NAV of Islamic unit trusts in Malaysia by
end 2007 stood at some USD5.12 billion or 9.97% of
total outstanding unit trusts net asset value
(Securities Commission)

29

Growing Potential of Takaful

Takaful sector has been growing at an average of 17% p.a. since 2001 and by end 2007 total
contributions were estimated at USD931 million.
(BNM, Islamic Finance News)

Growth of takaful is driven by demand for mortgage, motor, medical and education plans.

In the same period total assets of Takaful are estimated to amount to USD1.7 billion.

403
492.5
553.8
717.2
0
500
1000
1500
2000
2500
2003
2004
2005
2006
Year
Millions
Family Takaful Assets
General Takaful Assets
Total Takaful Contributions 2003
-
2006

0
0.2
0.4
0.6
0.8
1
1.2
1.4
2001
2002
2003
2004
2005
2006
Thousands
IL
Annuity
Group
Indvdl
Breakdown of Family Takaful Contributions

2001
-
2006

30

Future prospects for Takaful

As

at

end

2006

Takaful

penetration

in

Malaysia

is

estimated

to

be

6
.
3
%
.

Family

takaful

penetration

relative

to

general

takaful

penetration

is

higher,

indicating

that

future

takaful

growth

will

be

driven

by

demand

for

more

products

from

family

takaful

segment
.

Malaysia’s

has

a

relatively

broader

distribution

infrastructure

for

Takaful

compared

to

other

regions

(direct

agents,

direct

mail,

bancassurance)
.

This

is

expected

to

be

one

of

the

key

contributors

to

deepen

the

Takaful

market
.

Country

2005 Premiums (USD)

Relative
Penetration

GDP per capita
USD

Total

Life

Non Life

World

518.5

299.5

219.0

137%

6,893

Malaysia overall

283.3

188

95.3

197%

5,216

Malaysia Takaful

13.2

9.7

3.5

273%

Source Malaysian S&P, Islamic Finance News, Swiss RE Sigma Report, BNM

31

Other recent product innovations

There

is

increased

depth

in

products

and

services


Shariah

compliant

REITS

have

been

listed

on

Bursa

since

2005
.

REITS

offer

more

diversification

opportunities

in

addition

to

regular

income

streams
.

Despite

higher

relative

withholding

tax,

there

is

growing

interest

from

GCC

investors

in

infrastructure

projects

slated

(eg

IDR)

and

their

potential

for

providing

long

term

stable

income

as

REITS



Regulated

Short

Selling

reintroduced

in

Jan

2007

brings

Bursa

closer

to

developed

market

standards

by

giving

investors

opportunities

to

make

profit

despite

bearish

market

conditions



FTSE

Bursa

Indices

enhance

the

attractiveness

of

Malaysia

as

key

destination

for

global

Islamic

fund

flows

by

providing

investors

internationally

accepted

performance

benchmarks


Exchange

Traded

Funds



Asia’s

First

Shariah

compliant

ETF

was

launched

Jan

2008

with

a

public

spread

oversubscribed

by

22
.
5

times
.

This

development

adds

to

the

growing

list

of

liquid

investment

options

available

to

investors



Islamic

derivatives



Futures

Crude

Palm

Oil

(FCPO)

and

Single

Stock

Futures


32

Increasing Professional Capabilities in Malaysia


Financial

Planning/

investment

advisory

services

continue

to

experience

healthy

growth

driven

by

increasingly

complex

products

and

growing

client

sophistication


As

at

end

2006

there

are

some

11
,
500

memberships

registered

with

major

financial

planning

bodies

representing

a

growth

of

some

14
%

in

the

last

2

years*


Financial

institutions

are

increasingly

placing

strong

emphasis

on

WM

divisions

as

a

client

retention

strategy

as

well

as

a

means

to

grow

revenues


In

line

with

general

move

to

increase

professionalism

of

advisory

services

training

programs

that

are

Islamic

finance

focused

have

emerged


2006

-

INCEIF

established

to

support

the

need

to

develop

Islamic

finance

talent


2007
-

Islamic

Financial

Planner

developed

jointly

by

FPAM

&

IBFIM


*Source FPAM, MFPC, MChFC

33

Opportunities and Issues of Islamic Wealth Management

34

Drivers for Islamic Wealth Management Growth


The

sustained

rise

in

price

of

petrol

is

expected

to

continue

to

drive

growth

for

development

of

Islamic

finance

products

as

investors,

for

example

from

the

the

Middle

East,

seek

appropriate

avenues

for

diversifying

economic,

business

and

financial

holdings


Whilst

major

investments

are

likely

to

be

driven

by

sovereign

wealth

funds

and

government

investment

corporations

another

key

segment

looking

for

investment

opportunities

are

high

net

worth

individuals



With

its

diversity

of

Islamic

finance

products

and

experienced

players

Islamic

capital

markets

such

as

Malaysia,

are

expected

to

be

at

the

forefront

of

capturing

the

anticipated

net

capital

outflows

of

oil

producing

nations


Supported

by

a

facilitative

and

comprehensive

regulatory

framework

Islamic

finance

has

come

to

the

stage

where

development

in

wealth

management

services

will

drive

future

growth


35


The numbers of HNWI expected to increase supported by economic
expansion of Asia Pacific and MENA (Middle
-
East
-
North
-
Africa) regions


Some

USD
1
.
5

trillion

of

Gulf

Corporative

Countries

(GCC)

funds

are

held

in

assets

worldwide

vested

in

treasuries,

corporate

bonds,

equities

and

funds
.

The

GCC

region

accounts

for

3
.
2
%

of

the

global

high

net

worth

population
.

(S&P,

Islamic

Finance

News,

Cap

Gemini)

Opportunities: Wealth Worldwide

1996

2006

2011

# of HNWI’s

(Financial Assets > $1
million)

4.5 million

9.5 million

Estimate of HNWI
Wealth

$16.6 trillion

$37.2 trillion


$51.6 trillion

# of Ultra HNWI’s

(Financial Assets >$30
million)

95,000

1% of HNWI
population

1/3 of HNWI wealth

Source: World Wealth Report 2007, Cap Gemini

36

Opportunities: Global Product Acceptance


Malaysia is known for coming out with innovative products.

Shariah harmonisation has helped to improve marketability of products in markets
beyond Malaysia


Alternative Sukuk structures using globally accepted Islamic principles have
consistently been oversubscribed


Shariah compliant structured products structured in Malaysia have been successfully

offered regionally viz Brunei, Singapore & Indonesia



Domestic Shariah compliant unit trusts that choose to list cross border on DIFC need
only provide Shariah disclosure


Harmonisation is not Standardisation. Differences of opinions are well celebrated
in Islam and
could contribute towards developing creative and innovative products.

37

Issues: Experienced Islamic Finance Professionals Must Grow Faster

The

provision

of

sound

advice

requires

experience
.

Analysis

must

take

into

account

both

personal

and

business

needs

looking

at

financial

and

non

financial

products
.

To

be

a

trusted

advisor,

he

or

she

should

be

well

rounded
.

Recognizing

that

a

wide

skill
-
set

is

required

for

a

robust

industry
.

Other

jurisdiction

has

established

key

learning

framework

that

is

backed

by

global

industry

players

for

fast

tracking

the

development

of

wealth

management

services
.


Similar

or

better

approach

must

be

undertaken

in

Malaysia

specifically

for

developing

Wealth

Management

skills
.



38

Issues: Limited Product Developments in Islamic Estate Planning


Islamic

products

for

wealth

distribution

are

largely

undeveloped
.

The

limited

offerings

available

are

based

on

basic

fiqh

concepts

that

are

accepted

under

existing

civil

laws


Conventional

products

are

comparatively

more

developed

and

have

greater

variety
.

For

instance

the

concept

of

trust

can

be

applied

to

various

purposes

such

as

living

trusts,

family

trusts,

education

trusts,

unit

trusts

etc
.


A

conventional

trust

deed

does

not

confine

the

assets

settled

to

be

shariah

compliant
.

There

is

a

need

for

a

specific

document

that

functions

as

a

trust

but

is

Shariah

compliant


Islamic

Trust

Deed

or

Amanah

Deed

may

provide

a

solution
.

Such

an

Amanah

deed

would

ensure

that

the

assets

are

settled

and

managed

in

accordance

Shariah



Current

practice

requires

an

individual

to

hibah

their

assets

prior

to

establishing

a

trust
.

Without

doing

so

trusts

created

may

fail

as

any

assets

not

willed

or

given

in

hibah

would

form

part

of

the

estate

to

be

distributed

according

to

fara’id
.

39

Issues: Developing concepts into Viable Products

More

research

must

be

made

to

develop

fiqh

concepts

into

credible

products

that

are

endorsed

by

the

industry
.


An

example

is

the

concept

of

Waqf

i
.
e
.

properties

(fixed

or

moveable)

settled

for

the

benefit

of

Waqf

beneficiaries
.


Currently

waqf

falls

under

the

purview

of

state

religious

authorities,

waqf

is

one

of

the

largely

untapped

potential

in

wealth

distribution


Opportunities

exist

to



Develop

idle

Waqf

lands

to

maximise

revenues

to

beneficiaries


Enhance

the

attractiveness

of

Waqf

assets

as

Islamic

financial

instruments



Utilise

Waqf

as

potential

product

concept

for

wide

arrays

of

applications


40

Issues: Lost Opportunities

Local

financial

institutions

may

only

offer

products

developed

in

Malaysia

or

approved

by

regulators

therefore

limiting

the

creation

of

an

attractive

portfolio

that

takes

advantage

of

market

timing

in

global

markets
.


HNWI’s

are

generally

highly

seasoned

investors

and

domestic

service

providers

should

be

able

to

offer

a

product

suite

comparable

to

that

of

an

offshore

bank
.

Locally

registered

financial

institutions

have

attained

the

competency

level

of

offering

global

products

and

are

better

placed

to

advise

domestic

HNWI

on

their

portfolio
.


However

under

the

MIFC

agenda

Islamic

banks

have

the

opportunity

to

conduct

international

currency

business

in

Malaysia

and

offshore

product

offering

is

possible
.


41

Moving Forward : “Malaysia As An International Islamic Financial Hub”


MIFC

-

n
ationwide

initiative

to

promote

Malaysia

as

an

International

Islamic

Financial

Centre
.



MIFC

aims

at

fortifying

Malaysia’s

position

as

a

vibrant,

innovative

and

competitive

International

Islamic

financial

hub
.


Vision

in

conjunction

with

MIFC

-

to

strategise

to

promote

Malaysia

as

a

global

reference

centre

for

Shariah

views

on

Islamic

banking

and

finance,

banking

on

our

unique

culture

and

long

history

of

Shariah

tolerance
.


By

promoting

genuine

Shariah

tolerance,

Malaysia

can

aspire

to

become

the

cosmopolitan

Shariah

reference

centre

where

varied

Fiqh

views

can

be

discoursed

and

put

into

practice
.


Global

players

would

assemble

here

for

latitude

in

creation

and

innovation,

in

search

of

new

ideas

for

their

financial

products
.



42

Moving Forward


The

results

of

regulatory

liberalization

since

2005

and

progressive

Shariah

research

are

beginning

to

take

effect

with

more

sophisticated

products

and

services

such

as

shariah

compliant

structured

products,

real

estate

investment

funds

have

been

available

to

retail

clients
.


Whilst

wealth

managers

are

able

to

address

the

issues

of

wealth

enhancement,

protection

and

distribution,

existing

services

need

to

be

further

developed

to

allow

for

more

customization

and

opportunity

for

returns

enhancement

in

all

economic

and

investment

cycle



Leveraging

on

the

strengths

of

its

comprehensive

domestic

infrastructure,

active

market

making

and

products

innovation

Malaysia’s

Islamic

capital

market

is

poised

to

develop

into

a

key

centre

for

international

Islamic

funds

to

reside
.

However

regional

competition

is

expected
.


Islamic

banks

such

as

Faisal

Bank

and

CIMB

have

establishment

of

Islamic

Private

Banking

services

in

view

of

the

potential

growth

of

Islamic

wealth

management
.

43

Contact Details

Please direct all queries to:

Mohd Willieuddin Lim

Director, Global Markets

CIMB Islamic Bank Berhad

1st Floor, Menara Promet, Jalan Sultan Ismail,

50250 Kuala Lumpur, Malaysia.

Tel: +603 2116 1270, Fax: +603 2144 8509

Email: willieuddin.lim@cimb.com.


New York

London

Brunei Darussalam

Hong Kong

Jakarta

Kuala Lumpur

Singapore

Bangkok

Bahrain

Tokyo

Yangon


Emphasis on knowledge
products for private clients
and institutions;


Leveraging regional product
expertise;


Understanding of local
requirements;


Capable banking
infrastructure to execute
transaction;


Comprehensive banking
franchise;


A top provider of tailor
-
made
financial solutions to clients
across the region;


Kuala Lumpur is the leading
Islamic financial centre.

44

Important Notice

This

document

and

its

contents

are

proprietary

information

and

products

of

CIMB

and

may

not

be

reproduced

or

otherwise

disseminated

in

whole

or

in

part

without

its

written

consent
.



The

information

in

this

presentation

reflects

prevailing

conditions

and

our

views

as

of

this

date
.

In

preparing

this

presentation,

we

have

relied

upon

and

assumed,

without

independent

verification,

the

accuracy

and

completeness

of

all

information

available

from

public

sources

or

which

was

provided

to

us

or

which

was

otherwise

reviewed

by

us
.

Although

the

information

contained

herein

is

believed

to

be

reliable,

CIMB

makes

no

representation

as

to

the

accuracy

or

completeness

of

any

information

contained

herein

or

otherwise

provided
.

Nothing

contained

in

this

presentation

is,

or

shall

be,

relied

upon

as

a

promise

or

representation

as

to

the

future
.