Monday, 08 September 2014 15:17  Habhajan Singh

MALAYSIA emerged tops on various checkpoints for Islamic finance in a newly released global measurement of the industry, scoring high points for areas like sukuk growth and performance, Islamic mutual funds market, and the level of education and research.

Malaysia scored 93 out of 100 in the Islamic Finance Deve- lopment Indicator (IFDI), which badges itself as the world’s “first and only indicator” that meas- ures development of the Islamic finance industry holistically be- yond earnings, profits and asset sizes.

The report is a joint initiative between Thomson Reuters and Islamic Corp for the Develop- ment of the Private Sector, the private sector development arm of the Islamic Develop- ment Bank.

IFDI 2014 ranks Malaysia, Bahrain and Oman as the three most developed and well- rounded Islamic finance markets.

Malaysia is the runaway leader with an indicator value of 93. The first chasing pack is 17 points behind and is made up of Bahrain, Oman and the United Arab Emirates. This trio is chased by a bigger group of six — Qatar, Kuwait, Jordan, Pakistan, Saudi Arabia, and Brunei, the report notes.

“While Malaysia continues to resist plateauing by strengthening its regulatory frame-work and pursuing liberalisation and internationalisation policies, it’s the middle pack, comprising primarily of the Gulf Cooperation Council countries, which could really drive Islamic finance development and give Malaysia a run for its money,” the report added.

The IFDI is a composite weighted index that measures the overall development of the Islamic finance industry by providing an aggregate assess- ment of the performance of all its parts, in line with the objec- tives of Islamic principles.

It is measured by five key areas — quantitative develop- ment, knowledge, governance, corporate social responsibility and awareness — which have been aggregated to provide global and country level indicators

The report was released at the Global Islamic Finance Forum 2014 in Kuala Lumpur last week.

IFDI 2014 notes that 28 countries have Islamic finance regulations, but only Bahrain, Malaysia, Nigeria and Pakistan have regulations covering all sectors.

The report noted that Malaysia, Pakistan, and Indonesia rank highly on all three subindicators for governance while Bangladesh’s “greatest strength” lies in Shariah governance.

“As South-East Asian leader, Malaysia tussles with Bahrain on all subindicators; Malaysia loses out to Bahrain in the final overall counting due to its much weaker Shariah governance score, and only marginally edged past Bahrain for corporate governance,” it says.

In the area of research, Malaysia was again a runaway leader, a reflection of the “huge gap” in absolute numbers be- tween research papers coming out of Malaysia and the rest of the world.

In research, Malaysia scored 211 points, far ahead of Pakistan (63), Tunisia (50), Bahrain (49) and Jordan (35).

The research sub-indicator takes stock of three previous years of research (2011-2013) to capture a more representative picture of the cumulative development of ongoing research. Two metrics are considered: Number of peer-reviewed journal articles and number of other research papers.

Even after adjusting for economy and population sizes, there is a huge gap in the indicator value between leader Malaysia and the rest of the top 10, just as there is a huge gap in absolute numbers between research papers coming out of Malaysia and the rest of the world, according to the report.

Malaysia’s total 421 research papers (for both metrics) accounted for 31% of total research papers on Islamic finance, it added.

It also said four of the top 10 research providers are Malay- sian institutions, contributing 18% of all Islamic finance re- search from 2011 to 2013.

The report singled out Malaysia’s International Shariah Research Academy for Islamic Finance as the “top contributor”.