Beruflich Dokumente
Kultur Dokumente
BACHELOR OF ACCOUNTANCY
(HONS)
FINANCIAL MARKET
(MAF 630)
GROUP PROJECT
STRATEGIES FOR THE DEVELOPMENT OF
MALAYSIAS ISLAMIC CAPITAL MARKET
INTRODUCTION
The Malaysia capital market is unique because it has two types of capital market. There
are Islamic and conventional those operate concurrently. The definition of Islamic Capital
Market (ICM) is an investment and financing activities and products are structured in accordance
with Shariah principles. It refers to the market where activities are carried out in ways which
does not conflict with the principles of Islam.
Besides that, the Securities Commission Malaysia define the ICM as a market
transactions are carried out in ways that do not conflict with the conscience of Muslims and the
religion of Islam. Here, there is assertion of religious law so that the market is free from
activities prohibited by Islam such as usury (riba), gambling (maisir) and ambiguity (gharar).
The ICM is a component of the overall capital market in Malaysia. It plays an important role in
generating economic growth for the country.
The ICM is ideally characterised by the absence of interest based transaction, doubtful
transactions and stocks of companies dealing in unlawful activities or items (Alhabshi, 1994).
The two main reasons that ICM have been identified to support the emergence of Malaysian
ICM are the 1997 Asian Financial Crisis and the liquidity problem resulting from surplus funds
the Islamic finance industry. Following the Asian Financial Crisis, the products innovation,
infrastructure facilities, policy incentives, human capital development and financial regulations
are the main focused by the Malaysian government.
The ICM functions as a parallel market to the conventional capital market, and plays a
complementary role to the Islamic banking system in broadening and deepening the Islamic
financial markets in Malaysia. There development of this ICM is remarkable and received
attention from all over the world. To develop the ICM in Malaysia, there used many strategies
that will be discuss later on.
strategies to strengthen the distinctive value propositions offered by Malaysia for a broad range
of Islamic intermediation activities the range of Shariah-compliant stockbroking and portfolio
products and services. At the current stage of development, there is also a need to strengthen the
service and operational infrastructure so that domestic Islamic products and services can be
effectively marketed to global customers. This requires a widening of international distribution
channels coupled with intensied proling of Malaysias ICM.
In order to promote Malaysia as a major hub for International Islamic Finance, the
countries financial and market regulators, including the Central Bank of Malaysia, Securities
Commission Malaysia (SC), Labuan Offshore Financial Services Authority (LOFSA) and
Bursa Malaysia, together with industry participation from the banking, takaful (Islamic
insurance) and capital market sectors in Malaysia have launched the Malaysia International
Islamic Financial Centre (MIFC) in August 2006. The focus of this centre is on the areas such as;
Sukuk origination, Islamic Fund and Wealth management, International Islamic Banking,
International Takaful- Takaful (Islamic insurance) and Human Capital development. Apart from
this, Securities Commission with collaboration of other regulatory bodies, has played an
important role in formulating a facilitative regulatory framework to strengthening and sustaining
Malaysia as an international hub for Islamic Capital Market.
There is also a need to accelerate the building of critical mass for the onshore portfolio
management. The development of a significant Islamic fund management industry is critical to
build domestic take-up capabilities for innovative domestic and international Islamic products. In
this regard, widening the range of Shariah-compliant products in the form of collective
investment schemes, indices, ETFs and REITs and the diversity of their investments by
sector and by geography, can attract more domestic and international investors. Mutual
regulatory arrangements to facilitate cross-border distribution will be expanded. A seeding
strategy will be developed to increase the diversification of Islamic investment strategies and
styles.
Priority will be placed on nurturing Islamic fund management services with high valueadd such as the Shariah-compliant venture capital and private equity industries that invest based
on the principles of active partnership and risk-taking, and socially responsible investing based
on Islamic principles. In this context, the Islamic fund management industry will play a key role
in developing products and services that not only generate economic returns but also comply
with universal ethical standards to strengthen the distinctive value proposition of Malaysias
ICM.
In order to further facilitate internationalization of the ICM, the Securities Commission
Malaysia (SC) will promote a shift from a Shariah-compliant approach to a Shariah-based
approach where the underlying structures of products such as mudarabah and musharakah
would originate from risk-sharing principles and offer signicantly different pricing and returns
characteristics. There is a need therefore to focus on product innovation and development efforts
that will provide a comprehensive array of Shariah-based products for the industry. Towards this
end, there will be further development of the Shariah legal, regulatory and governance
framework. The shift to a Shariah-based approach will require a higher level of risk tolerance
and acceptance of the longer gestation arising from participating in business ventures with more
direct linkages between risk and returns.
The modern Islamic financial products and services are developed using two different
approaches. The first is identifying and modifying existing conventional products and services to
comply with Shariah principles. The second approach is the innovation of new products and
services that involves the application of various Shariah principles .
As can be see,the Malaysian Islamic capital market products are mainly divided into five
categories of;
Sukuk(Islamic Bond).
There is a significant product innovation and sophistication all over the world and Shariah
compliant products have proven to be attractive also to non-Muslim investors and offer many
opportunities, even to non-Islamic institutions.
The SC will also collaborate with the industry to identify potential hub opportunities
in ICM-related services, particularly in the provision of middle and back ofce functions. This
will be supported by initiatives to ensure a facilitative operational, tax and human capital
infrastructure to enhance the attractiveness of Malaysia as a base for regional and international
operations. The depth and width of Malaysias ICM has broadened the base of intermediation
capabilities in terms of Shariah research, advisory and compliance expertise.
The Shariah Advisory Council (SAC) in 1996. Assisted by the Islamic Capital Market
Development (ICMD), the scope of jurisdiction of SAC is to advise the Commission on all
matters related to the comprehensive development of the Islamic capital market and to function
as a reference centre for all Islamic capital market issues. In addition, the SAC is in charge to
analyses the Shariah principles which can be used for introducing new Islamic capital market
products and services, and also the existing conventional capital market instruments to determine
the extent to which these instruments comply with Shariah principles.
Further efforts will be made to enhance Malaysias contribution to Shariah research
through increased international collaboration on Shariah research and product
development to sustain the rapid pace of innovation. The Securities Commission will also
develop a code of conduct for Shariah advisers and further strengthen training and professional
education to increase the supply of Shariah experts on a broad range of capital market activities
and to maintain Malaysias position as a leading centre for ICM.
Malaysia has taken an initiative to cultivate the growth of various innovative Islamic
finance products either under banking sector or Islamic Capital Market to ensure participations
from local or foreign market players. At present, a holistic range of innovative Islamic capital
market products from equities to debt securities across all sectors and industries are being offered
by Bursa Malaysia. Strategic differentiation in identifying, designing to produce products and
services that customers perceive as being different in ways, that are important to them is the key
to sustainability in this market.
CONCLUSION
The ICM is growing rapidly and vibrantly. At present, Malaysia faraway exceed other
Muslim countries in term of capital market infrastructure with persistent support by Malaysia
government providing impulsion for the growth of Malaysia ICM. The support and leadership
provided by the government through the facilities and incentives has ensured the success of ICM
development in Malaysia.
Initiatives taken by the Malaysia government towards a global hub are substantial. By
looking in every perspective are being well focused.
REFERENCES
Securities Commission Malaysia website:
http://www.sc.com.my/index.asp?language=m
http://www.sc.com.my/sub.asp?pageid=&menuid=267&newsid=&linkid=&type=
http://www.sc.com.my/clients/sccommy/Links/IDB_conference.pdf
http://www.sc.com.my/eng/html/icm/11_2Q_msianicm.pdf
http://www.sc.com.my/eng/html/resources/annual/ar2003_bm/pebangunanicm.pdf
Other:
http://icapitalmarket.blogspot.com/2010/10/what-is-islamic-capital-market.html