Lender sees strong demand for sukuk and other sharia-compliant financing in the GCC
Exclusive: Malaysia’s Maybank Islamic in talks with regulators to launch operations in Dubai
Maybank Islamic, the sharia-compliant division of Malaysia’s largest lender Maybank that has $165 billion of assets under management, plans to launch wholesale banking operations in the UAE from next year, to help it service the GCC market and bridge two of the world’s biggest centres for Islamic finance.
“We have a strong footprint in Asia and want to link that with our contemporaries in the GCC in terms of financing infrastructure, looking for a home for funds to invest in and supporting the halal trade. We need to make that linkage,” said Mohamed Rafique Merican, chief executive of Maybank Islamic, in an interview with The National on Wednesday.
Maybank Islamic is the fifth largest sharia-compliant bank in the world with total assets of $50bn, ranking one below Dubai Islamic Bank. It is the only non-GCC Islamic bank ranked in the top ten.
The company began talks with regulators in 2017 and hopes to secure a licence from the Dubai Financial Services Authority by the end of this year or early 2019 to set up an office in the emirate’s financial free zone Dubai International Financial Centre (DIFC).
The office would provide sharia-compliant wholesale banking services to clients across the GCC, including sukuk mandates, syndicated loans and Islamic trade facilities to link the Middle East halal industry with that in Southeast Asia, Mr Merican said.
The Islamic banking industry globally is growing at around 10 per cent per year, outstripping growth in conventional banking as more people seek ethical, alternative forms of banking following the global financial crisis. The world’s Muslim population also has been historically underserved for sharia-compliant financing.
The total value of global Islamic finance assets is projected to grow by 72 per cent to $3.78 trillion by 2022, from $2.2trn in 2016, according to the Islamic Finance Development Report published in 2017.
Annual growth in GCC Islamic banking assets has been slower in recent years, reaching 4 per cent in 2017 due to regional economic slowdown. However, this is expected to pick up by the middle of this year, S&P Global Ratings said this week.
Maybank Islamic parent, Maybank, has a small representative office in Bahrain, but Mr Merican said this may close if the Dubai licence is granted. “In terms of the community, the marketplace, the provision of regulations, it [the preferred location] would be DIFC,” he said.
In particular, the chief executive sees “strong demand” for sovereign and corporate sukuk issuance in the GCC. “For us to be relevant in that space, we need to build a presence here.” The region has a robust investment infrastructure and opportunity for significant “yield pick-up”, as well as latent demand for ‘green bonds’ to finance renewable energy projects, he added.
Global sukuk issuances grew 17 per cent in 2017 to $100bn, driven largely by GCC sovereigns, rating agency Moody’s said in March. It expects a similar level of issuance in 2018.
Maybank Islamic counts Malaysia (where it has a 33 per cent market share), Singapore and Indonesia as its biggest markets, where it offers a mix of retail, SME financing, corporate and sukuk advisory services. It has also conducted sukuk transactions in Hong Kong, the US and the UK.
It recorded year-on-year growth of around 11 per cent last year, in line with that of the Islamic banking industry in Malaysia, the world’s biggest Islamic banking centre where around 31 per cent of total financial assets are Islamic.
Mr Merican forecasts similar growth in 2018 apart from in Indonesia – a young market for financial services – where the company has witnessed far more rapid annual growth of between 20-40 per cent over the last 2-3 years. “This is from a relatively small base,” the chief executive explains.