Zeti: Islamic finance will be driven by emerging economies trade demand

Written by Syarina Hyzah Zakaria and Chong Jin Hun of theedgemalaysia.com
Wed Sep 19 2012 01:12:05 PM

KUALA LUMPUR (Sept 19): Increasing investment opportunities prompted by growing trade demand in emerging economies could be an important catalyst in the growth of Islamic finance, according to Bank Negara Malaysia (BNM) governor Tan Sri Zeti Akhtar Aziz.

“This growing demand in emerging economies is also generating investment opportunities, In this environment, Islamic finance has an important potential to facilitate trade and investment flows that will be mutually reinforcing,” she said in her welcoming address at the Global Finance Forum 2012 on Wednesday.

An important feature of Islamic finance is that it involves financial transactions that must be accompanied by an underlying economic transaction.

“And when it is cross border, it will facilitate financial flows that will support international trade and investment flows. It will contribute towards bridging economies and enhancing our economic connectivity with each other,” she added.

Currently, emerging economies already account for 63%, or US$37 trillion (RM113.13 trillion) of world trade as at end-2011 — an increase of 17%, compared to 10 years ago.

Meanwhile, total Islamic financial assets size has now surpassed US$1 trillion, following unabated growth from the mid-1990s.

In her speech, Zeti also said that the Islamic bond, or sukuk, market has become a crucial component of Islamic finance which provides a distinctive platform to foster global linkages.

“Sukuk epitomises a truly international product for global fund raising and investment activities.

“An increasing number of multilateral agencies, sovereigns, government agencies and corporations, including multinational corporations have relied on the sukuk market as a source of financing.

“And the diverse composition of the sukuk investors across continents has added further depth to the international dimension of the sukuk market,” Zeti said.

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