KUALA LUMPUR, March 27 (Bernama) -- The Islamic banking industry is expected to increasingly leverage on programmes to further expand its capacity in financing the halal industry, says Bank Negara Malaysia (BNM).

The programmes are the Asian Development Bank (ADB) trade finance and supply chain finance programmes, offering guarantee facilities which help manage trade financing risks, in particular for trade with higher-risk emerging markets.

The central bank said Islamic finance was recognised by the government as a key enabler to support the growth of the halal industry.

“The Islamic finance industry came together to participate in the Malaysia International Halal Showcase (MIHAS) last year and 865 business leads were generated at the event,” BNM said in its Financial Stability and Payment Systems Report 2018.

It said a profit rate subsidy of two per cent had also been earmarked by the government in the 2019 Budget as part of an RM1 billion small and medium enterprises (SME) Shariah-compliant financing scheme to finance halal exporting companies.

“The scheme will be made available through Islamic financial institutions,” it said.

In 2018, financing by Islamic financial institutions grew by 10.5 per cent to RM668.7 billion compared with 9.4 per cent in 2017, while the share of Shariah-compliant financing as a proportion of total banking sector financing increased to 36.6 per cent (2017:34.9 per cent).

According to BNM’s report, this significant growth was partly contributed by the injection of additional Islamic financing assets arising from a merger between an Islamic bank and a non-banking institution in early 2018.

While SME growth moderated to 8.9 per cent (2017:12.5 per cent), in line with the more moderate growth of the economy.

On the funding side, Islamic deposits and investment accounts saw steady growth of 10.2 per cent to RM742.3 billion (2017:11.7 per cent).

-- BERNAMA