Malaysia to reform Islamic banking industry

Goal is to double Islamic banking’s market share to 40%.

Malaysia is implementing regulatory reforms to help its Islamic banking industry expand further. The government originally aimed for 20% market share for Islamic banks by 2010

The Islamic banking sector, however, has had difficulty maintaining this goal despite double-digit growth in both lending and assets. Islamic banks have added RM111.6 billion in assets over the past two years, bringing their share of total banking assets in Malaysia to 19.6% in December 2012.

Their share of loan business hit 20% in January 2012 and was at 21.3% last December.

Malaysia aims to boost the market share for Islamic banking to 40% by 2020. It also wants to make the industry more international.

To achieve this, regulators introduced new rules over the past two years and are preparing to release a brand-new legal framework for Islamic finance this year.