Malaysian Islamic assets sector set for boom-Maybank

KUALA LUMPUR, Aug 25 (Reuters) - Islamic banking assets in Malaysia are expected to post double-digit growth rates annually, propelled by rising demand for sharia-compliant assets, the country’s top lender said on Monday.

Islamic banking accounts for about 13 percent of total banking assets in this mostly Muslim country, and is tipped to be one of the leading growth drivers for the Southeast Asian economy as services replace manufacturing as the economy’s backbone.

Malaysian authorities are courting investors by offering incentives such as a waiver of withholding tax on non-residents’ investments in non-ringgit Islamic securities, in a quest to make the country a global hub for the $1 trillion industry.

“From the customer’s perspective, the Islamic banking product, as compared to conventional, is at least at par, if not better,” Maybank chief executive Abdul Wahid Omar told reporters as the launch of an Islamic credit card by the bank.

“We expect double-digit growth,” he added, declining to give further details.

Maybank, whose Islamic arm is Malaysia’s largest Islamic bank in terms of assets, said it planned to roll out 13 products in the financial year ending June 2009 to tap growing demand.

The launches would include consumer, treasury and business banking products, said Ibrahim Hassan, acting chief executive of Maybank Islamic.

He said Maybank, which recently acquired a stake in a Pakistan bank and wants to expand in Cambodia, would focus on growing its Islamic business locally for now.

“We are trying to strengthen our position further at the moment in terms of domestic operations,” Ibrahim said.

Malaysia is competing with financial centres like Dubai and London to become an Islamic banking hub as a flood of Middle East petrodollars underpins a boom in the industry.

Islamic law forbids payment of interest and requires transactions to involve a specific real asset, such as a property or a commodity. Islamic bond-holders, unlike their conventional peers, are often technically owners of an asset, not lenders.

Reporting by Liau Y-Sing