This chapter will cover all the cardinal factors behind the success of these two states as Muslim Capital Markets every bit good as the substructures available.
5.2 Overview of the Malayan ICM
ICM being an of import section in Malaysia ‘s fiscal system, keeps on registering strong augmentation with the full complement of merchandises, substructure, establishments, mediators and investors lending to the strengthening of the capital market.
Coordinated by Malaysia International Islamic Financial Center ( MIFC ) , which comprises a community web of fiscal and market regulative organic structures, authorities ministries and bureaus, fiscal establishments, human capital development establishments and professional services companies that are take parting in the field of Islamic finance. , in advancing Malaysia ‘s Islamic finance and the capital market.
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The ICM has a assortment of merchandises and mechanisms, including Shariah testing systems for equities, sukuk, unit trust, exchange-traded financess ( ETFs ) , existent estate investing trusts ( REITs ) and structured merchandises and derived functions. ( Beginning: MIFC: 2 )
5.2.1 Regulatory and Supervisory Infrastructure
Malaysia has a robust regulative substructure as a series of steps has been taken. For illustration, three guidelines have been issued, viz. for Islamic fund direction, Islamic securities and Islamic REITs. This is in response to investors who are progressively interested in more sophisticated fiscal demands which are another cardinal drivers for merchandise invention in Islamic finance every bit now there is greater consciousness on the benefits of diversifying their balance sheet hazard. Islamic finance investors are besides more adventuresome by puting in hedge financess and more complex capital market merchandises.
On the other manus, there is the Shariah Advisory Council ( SAC ) within the Securities Commission ( SC ) which approves the rules for different merchandises and services while criterions are established by the relevant organic structures. Additionally, there has been the constitution of the International Shariah Research Academy for Islamic Finance ( ISRA ) , a dedicated research house for Shariah affairs in Islamic finance.
Facilitative regulative environment with strong investor protection Malaysia ‘s comprehensive, facilitative and sophisticated Islamic capital market regulative model ensures participants in its capital market enjoy the same grade of lucidity, certainty and protection. With an investor protection government, Malaysia offers investors end-to-end Shariah conformity.
Malaysia besides has an inclusive corporate administration model in topographic point, an international accounting model based on the International Accounting Standards Board, and its securities and colony systems and ordinances conform to IOSCO rules.
As an dynamic member of IOSCO, the SC has an widespread and strong web with member regulators globally. It is besides a signer to the IOSCO many-sided memoranda of understanding on information sharing and enforcement of securities Torahs, a major aim in supervising strengthening and enforcement attempts in the capital market.
5.2.2 ICM Successes and Continuous Product Innovation
Muslim merchandises now account for a important part of Malaysia ‘s capital market. Bing a innovator in planetary sukuk, Malaysia launched the first US $ 600 million five-year planetary crowned head sukuk in 2002. In 2007, sukuk accounted for 76 % of bonds approved by the SC. As at the 31st March 2008, its offshore market ( Labuan International Financial Exchange ) had sukuk deserving US $ 4.75 billion. ( Beginning: Islamic Finance News, 2008 )
In the domestic equity market, 85 % of securities listed on Bursa Malaysia are shariah compliant, stand foring US $ 182 billion, or 65 % , of the Bourse ‘s entire market capitalization. Besides, Bursa Malaysia established two Shariah indices with planetary index supplier FTSE Group. The FTSE-Bursa Malaysia Hijrah Shariah Index and the FTSE-Bursa Malaysia Emas Shariah are used as benchmarks for Shariah compliant investings by plus directors to make new merchandises. As at June 2008, Malaysia had 138 Islamic unit trusts, from merely two in 1993, with a combined net plus value ( NAV ) of US $ 5.6 billion, stand foring more than 35 % of the planetary Islamic unit trust industry NAV. The state besides has two listed Islamic REITs with infirmaries and plantations as their chief assets. ( Beginning: Islamic Finance News, 2008 )
In January 2008, Asia ‘s first Islamic Exchange Traded Fund ( ETF ) , MyETF, was launched tracked by the Dow Jones Islamic Market Malaysia Titan 25. Within the wealth direction industry several structured investing, targeted at establishments and high net worth persons, have besides been launched. ( Beginning: Islamic Finance News, 2008 )
The Malayan Islamic fund direction industry has seen phenomenal growing from merely two Islamic unit trust financess in 1993 to 136, 25 % of the entire 539 financess, with a combined net plus value of US $ 5.03 billion as at end-March 2008. Several sweetenings, like revenue enhancement exempts and tax write-offs, etc have offered in the authorities national budget of 2007 and 2008 to further hike this industry. Not burying the necessary fund direction accomplishments, there have been the creative activity of the Securities Industry Development Corporation ( SIDC ) and the International Centre for Education in Islamic Finance ( INCEIF ) . ( Beginning: Islamic Finance News, 2008 )
Finally, Malaysia is besides dedicated to work with other Centres in making an Muslim capital market web to supply necessary relationships in optimizing chances across Islamic markets. For illustration in 2007, the SC signed a common acknowledgment understanding with the Dubai Financial Services Authority for cross-border selling and distribution of Islamic financess between Malaysia and the UAE.
5.3 Outline of the ICM in Bahrain
Bahrain has a long history in the Islamic finance industry. The enlargement of the industry was slow during the early old ages, so lifting oil monetary values after the Gulf war acted as a growing stimulator as demand for Islamic merchandises increased due to extra liquidness. The function of the Central Bank, the state ‘s strategic location and the being of back uping establishments in Bahrain are the three grounds holding facilitated Bahrain ‘s outgrowth as the Islamic fiscal Centre in the Middle East.
The Central Bank of Bahrain ( CBB ) , once known as the Bahrain Monetary Agency ( BMA ) , has played a important function in regulation and marketing the industry. CBB besides pioneered sukuk issue for the liquidness direction of Islamic Bankss in 2001 via its salam and ijarah sukuk. In add-on, CBB executed a MOU with Tokyo Commodity Exchange ( TOCOM ) in 2005 to enable fiscal establishments, agents and other participants in Bahrain to transport out minutess on TOCOM utilizing Shariah compliant instruments. As a effect of CBB ‘s active direction, the entire assets of Muslim Bankss in Bahrain grew from US $ 1.9 billion in twelvemonth 2000 to US $ 12.1 billion by March 2007, stand foring a growing of over 500 % . ( Muslim Finance News, 2007 )
The being of back uping administrations has complemented Bahrain ‘s Islamic finance landscape. The AAOIFI was established in the early 1990s to invent accounting and Shariah criterions for Islamic fiscal establishments. CBB was the first Central Bank to do AAOIFI criterions mandatary for all participants, and other states subsequently followed. The Liquidity Management Centre ( LMC ) was developed in 2002 as an intermediary bureau to subvention Islamic fiscal trading. Its purpose was to make an active secondary market for exchequer direction.
Bahrain besides has two organic structures chiefly with the aim of back uping the growing of the Islamic capital market, i.e. the International Islamic Financial Market ( IIFM ) founded in 2002 and the Islamic International Rating Agency ( IIRA ) in 2005. IIFM was re-launched in 2006 with the purpose of developing the Islamic primary and secondary market via assorted undertakings. IIFM has late worked with international administrations like the International Capital Market Association ( ICMA ) and the International Swap and Derivatives Association ( ISDA ) to research agencies to excite growing in the Islamic capital market. IIRA, with its evaluation of Takaful and Islamic fiscal establishments, in both the recognition and Shariah quality evaluation, aims to ease more sukuk issue that will assist the industry to get at the critical mass needed to promote secondary market trading. ( Beginning: Islamic Finance News, 2008 )
Bahrain established the first Islamic bond index, the Dow Jones Citigroup Sukuk Index Strategy, a joint attempt with the CBB, Dow Jones Indexes and Citigroup Corporate. All these developments confirm to Bahrain ‘s focussed attempt to develop a wholesome Islamic fiscal system consisting non merely the banking system but besides the money market and capital market system.
As at April 2007, CBB had approved over 2,000 financess with about 40 Shariah compliant financess. The Islamic fund industry in Bahrain has been turning at an one-year rate transcending 20 % , stand foring US $ 1 billion of assets out of US $ 9 billion in entire fund investing. There have been besides geographical variegation in the equity market, Al Amin Bank for illustration launched a new investing fund, Kotak Indian Islamic Fund ( KIIF ) aiming investing in the Indian stock market under the rules of Shariah. ( Beginning: Islamic Finance News, 2008 )
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