Islamic finance: Malaysian expert sees Hong Kong benefiting from deglobalisation, shift in ethical financing

A reversal in globalisation and challenges faced by Western financial system are presenting fresh opportunities for Islamic finance to gain a stronger foothold and influence among consumers and investors in Asia-Pacific, an industry expert said.

Hong Kong is well-positioned to leverage its status as a global financial hub to establish connections with industry powerhouses in Southeast Asia and the Middle Eastern countries, according to Azman Mokhtar, chairman of the leadership council at Malaysia International Islamic Finance Centre.

"As the world is de-globalising, there are shifting sands, and new trade and investment routes are being placed in many ways," he said at the Asian Financial Forum in Hong Kong on Thursday. Hong Kong can collaborate with market leaders like Malaysia, Indonesia and Saudi Arabia to broaden or deepen its services, he added.

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Azman Mokhtar, chairman of the leadership council at International Islamic Finance Centre. Photo: Handout alt=Azman Mokhtar, chairman of the leadership council at International Islamic Finance Centre. Photo: Handout>

Azman served as the managing director of Khazanah Nasional, Malaysia's sovereign wealth fund, between June 2004 and July 2018. The fund had 122.5 billion (US$25.9 billion) of investment assets at the end of 2022.

Islamic finance is a system that operates in accordance with Islamic law and principles, which promote ethical and socially responsible financial practices.

Islamic finance has made significant progress to become a US$4.5 trillion market globally, and is set to grow 11 per cent annually through 2030, Azman said, citing industry forecasts. Banking and services based on Islamic tenets represent an attractive and fast-growing segment, he added.

"In the next five years, it will double to US$9 trillion to US$10 trillion," he said, backed by demand from 2 billion Muslims, or 24 per cent of the global population, who contributed nearly 10 per cent to the global economy.

Hong Kong has raised US$3 billion from the sale of three dollar denominated Islamic bonds or sukuk, since 2014 with a view to attracting more issuers and investors to participate in the city's capital market.

The comments followed recent efforts by Chief Executive John Lee Ka-chiu and Financial Secretary Paul Chan Mo-po to strengthen the city's economic and financial ties with the Middle East, as Beijing strengthened its outreach in the region amid worsening US-China relations.

Azman also noted several firsts in Islamic finance in non-Muslim countries elsewhere. Australia this year will have its inaugural Islamic lender to serve the country's 813,000 Muslims, while Luxembourg's central bank became the first among its European peers to join the Islamic Financial Services Board.

The board, based in the Malaysian capital of Kuala Lumpur, is tasked with setting global standards to promote and enhance the stability of the Islamic financial services industry.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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