Since 2006 Zarinah Anwar has been at the helm of the Securities Commission of Malaysia, the securities and capital markets regulator. As chairman she has spearheaded the growth and development of Malaysia’s Islamic capital market to the enviable position as the most dynamic and diversified in the world. Indeed, as a young lawyer working for Shell Malaysia, she structured the first ever sukuk in the market almost two decades ago.
Last year, for instance, about 60 percent of the world’s issuance of sukuk originated in Malaysia. In 2007, ringgit denominated sukuk issuance amounted to RM44.2 billion ($13.4 billion). Malaysia also has the largest number of Islamic investment funds in the world with over 150, followed by Saudi Arabia with 121, although the volume of assets under management is higher in the Kingdom with almost $20 billion compared with the $7 billion in Malaysia.
With this success has come international recognition and cooperation. For Zarinah, who was earlier last month honored in the Malaysian King’s birthday honors list, is currently the vice-chairman of the Emerging Markets Committee of the International Organization of Securities Commissions (IOSCO), and has been chairman of the ASEAN Capital Markets Forum, a grouping of securities regulators from the 10-member Association of Southeast Asian Nations (ASEAN).
In London earlier last month, Zarinah called for the restoration of faith in finance at a time when financial innovation, including Islamic financial innovation, is facing serious challenges arising largely from the impact of the credit crunch and global financial crisis. “Risk aversion, although down from levels experienced at the height of the crisis,” she explained, “remains significantly higher than in the past. Unsurprisingly this has reduced the appetite for the more innovative forms of finance. On the supply side, product development has taken a back seat while banks and other financial institutions continue to focus on asset quality. Lastly, products themselves are undergoing much heavier scrutiny. In the Islamic finance space, it is not just the more exotic varieties of instruments that are being reassessed; scholars have been casting a fresh eye on more common structures for compliance with Shariah principles. Regulatory changes over conventional instruments could also impact on Islamic markets.”
Malaysia believes that there is plenty of scope for future innovation in Islamic finance and rejects any notion that the impact of a shift away from financial innovation as a result of the crisis will do irreparable damage to the prospects for Islamic finance. The consensus is that innovation in the Islamic space will return, albeit in a slightly modified way and most likely for the better as structurers will go back to the basics and try to link their products more with the real economy.