KUALA LUMPUR, Nov 6 -- The Islamic Capital Market (ICM) and the demand for Shariah-compliant products is expected to strengthen in the future, supported by its appeal to a broader group of investors, despite the challenging economic climate.

In its Economic Outlook 2021 report released today, the Ministry of Finance (MOF) said the ongoing promotion of Shariah-compliant products and digitalisation of services will provide the impetus for the country to position itself as a prominent international centre for Islamic financial services.

It said the Islamic banking industry had expanded, with total assets valued at RM1.03 billion and a market share of 33 per cent as at end-July 2020, while the total Islamic financing outstanding increased to RM787.8 billion.

The growth is primarily contributed by household sector financing, which increased by 8.7 per cent to RM490.9 billion, mainly for the purchase of residential properties, it noted.

“Islamic financing is expected to expand further, supported by the recovery in economic activity and continuous promotion of Shariah-compliant products.

“The ICM will also continue to thrive with Malaysia being the world’s largest issuer of sukuk and Islamic equity,” it said.

As at end-July 2020, MOF said the domestic ICM was valued at RM2.2 trillion, accounting for 66.2 per cent of Malaysia's RM3.3 trillion total capital market; while sukuk issuances account for RM130.8 billion or 60.2 per cent of total bond issuances.

Sukuk outstanding stood at RM986.9 billion, or 62.6 per cent of total bonds outstanding, it said.

While Malaysia continued to account for the largest share of global sukuk outstanding at 45.6 per cent as at end-June 2020, MOF said the turmoil in the global market has affected the ICM’s performance.

“This was reflected in the subdued corporate sukuk issuances during the initial Movement Control Order (MCO) period.

“Nevertheless, the reopening of almost all economic sectors mid-year led to the improvement in corporate sukuk performance,” it said.

The ministry noted that Bursa Malaysia has continued to promote Shariah-compliant securities products, whereby as at end-July 2020, a total of 716 or 76.8 per cent of the 932 listed companies were Shariah-compliant.

It added that the market capitalisation of Shariah-compliant securities stood at RM1.18 trillion or 69.5 per cent of the total market capitalisation.

-- BERNAMA