KUALA LUMPUR: Islamic finance (IF) still requires incentives like tax deductions to spur the industry further, say top industry executives.
CIMB Islamic Bank Bhd’s chief executive officer (CEO) Badlisyah Abdul Ghani said government started offering incentives only from around 2004/2005 to jumpstart the industry amid strong demand for IF products but few suppliers in the market.
“The demand was there but the players were not keen to do the business. So, the reason the incentives were given was to get the industry moving. As a result of that, the supply of IF instruments and products became more, and the interest from consumers grew as they now had more choice of products,” he said during a panel session on the internationalisation of IF at the Malaysian Banking Summit here yesterday.
He went to say that the industry was, in fact, asking the government for more incentives under the upcoming national budget.
“One of the things that I personally asked for was to allow banks to have a double-tax deduction or tax rebate for investment in information technology, so that we can get rid of all the manual interventions that we currently have today in the provision of IF products,” he said.
The panel, which included Hong Leong Islamic Bank Bhd’s CEO Raja Teh Maimunah and Maybank Islamic Bhd'’ CEO Muzaffar Hisham, had been asked by a member of the audience if the IF industry here would be able to sustain itself should the incentives be discontinued.
Malaysia, which first embarked on Islamic finance 30 years ago, has become a global hub for the industry even as other jurisdictions have sprouted up.
However, the industry still needs incentives while it aspires to be an international Islamic financial centre, Raja Teh said.
“We’ve not really gotten the kind of traction we want. Until and unless we truly have got that kind of volumes, I don’t see those incentives being pulled out so quickly,” she remarked.
Meanwhile, Badlisyah said Malaysia had a lot to offer the world, in terms of innovation and development as it had already built up expertise in all segments of the IF industry.
It can also lead by example in terms of how the industry is governed, in terms of its comprehensive framework and legislation.
He stressed that the IF industry was no different from conventional finance in that it was also susceptible to a financial crisis, the likes the US had seen.
“It is susceptible to the same crisis because greed is human nature. It’s got nothing to do with the industry.
We can have all the structures in the world, the best governance and regulatory framework, but the moment we do not manage greed, it is dangerous,” he said.