Kuwait firm wins Malaysia Islamic bank licence

Reuters:Malaysia's central bank has awarded two foreign currency Islamic banking licences to companies in Kuwait and Indonesia.

The bank is seeking to broaden the country's sharia finance success beyond its domestic market.

Kuwait's Al-Aqeelah and Bank Muamalat Indonesia have been granted licences to do Islamic banking business in Malaysia with residents and non-residents in foreign currencies and limited ringgit transactions, central bank deputy governor Mohd Razif Abdul Kadir said.

"The process of setting up takes time, a few months perhaps," Mohd Razif told Reuters in an interview. "Not only are we reviewing (more applications), we are driving hard."

Malaysia is a key player in Islamic finance but some critics say its success has largely been domestic, where active Islamic debt issuance has made it the world's largest sharia bond market.

About $66 billion or 62.6 percent of global outstanding sharia bond issuance as at end-June was from Malaysia.

The Southeast Asian country now hopes to replicate its success in Islamic bonds in the international sharia banking and insurance and fund and wealth management businesses.

Foreign currency Islamic banks are given a 10-year tax exemption up to year of assessment 2016 on income earned from foreign currency sharia banking business.

"In terms of tax incentives, I think we are on par with the Middle East," Mohd Razif said. Malaysia's market regulator recently awarded Islamic fund management licences to several foreign firms including Kuwait-based Global Investment House, India's Reliance Capital, Kuwait Finance House and DBS Asset Management, a subsidiary of Singapore's DBS Group.

Mohd Razif said Islamic bonds, or sukuk, were now a mainstream investment with competitive pricing helping to broaden their appeal beyond the traditional Muslim investor base.