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19 July 2011

Significant Potential for Shariah-compliant Instruments, says Zeti

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By Dalila Abu Bakar

Jakarta: The favourable reception by the international market to Malaysia's recent Wakala global sukuk indicates significant potential for Shariah-compliant instruments, said Bank Negara Malaysia Governor, Tan Sri Dr Zeti Akhtar Aziz.

"The RM2 billion sukuk was huge and oversubscribed 4.5 times. There is significant demand and potential for Shariah-compliant instruments," she said at the "Joint High Level Conference on Islamic Finance by Bank Negara and Bank Indonesia: Enhancing Financial Linkages Towards Economic Prosperity", here, today.

She also said as the Wakala was large, the Malaysian government will not look at global sukuk for the time being but issue domestic ringgit denominated sukuk.

"We have to also manage our debt level. We will issue domestic ringgit sukuk because we have significant liquidity in our financial system.

"We will continue to issue ringgit denominated sukuk and welcome investors from all over the world, including Indonesia, as we have created an open market for investors to purchase sukuk," she added.

Zeti also said that Indonesia has great potential and can make a quantum leap in Islamic finance.

"Indonesia can actually make the quantum leap. It means it doesn't need to use an intermediary” it can go straight to a more developed system.

"Many of the things that Malaysia did was by trial and learning and we focused on the best. Looking at Malaysia and other countries that have developed Islamic finance, Indonesia can make the quantum leap," she added.

Earlier, in her opening remarks, Zeti said the transition of Islamic finance into the mainstream of the global financial system is an opportunity for the Nusantara financial intermediaries, in particular in Indonesia and Malaysia.

"This is to open new frontiers and participate in the trend and thereby strengthen further the economic and financial linkages of both countries," she added.

She said linkages and relationships have been fostered in Islamic finance by several key developments.

In the case of the private sector, she added, it has been in terms of an enhanced presence and participation in each others respective financial institutions.

"For practitioners, it has been in terms of being in each others financial markets.

"For policy makers and regulators, it has been in joint initiatives to create the enabling environment for effective and efficient cross-border financial business," she said.

Zeti also said that the collaboration between Malaysia and Indonesia in promoting partnerships in Islamic finance education was already taking place to expand the talent pool and technical expertise.

"Strategic partnerships between the International Centre for Education in Islamic Finance (INCEIF) and seven Indonesian universities has allowed for the exchange of academic resources for the offering of specialised programmes in Islamic finance," she added.

(Courtesy: Bernama)

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