Significant growth by financial system in next 10 years


Significant growth by financial system in next 10 years

Significant growth by financial system in next 10 years

Wednesday, December 21, 2011
  • nega
Bank Negara says Malaysian financial institutions now have a stronger global presence.

KUALA LUMPUR: Malaysia's financial system is expected to grow at an annual rate of 8 to 11 per cent, increasing its depth to six times of gross domestic product between 2011 and 2020.


Correspondingly, the financial sector contribution to nominal GDP in 2020 is expected to increase to 10.12 per cent from 8.8 per cent in 2010, Bank Negara Malaysia said in its Financial Sector Blueprint 2011-2010 released here Wednesday.


The contribution of financial institutions is also expected to strengthen, with assets of the banking sector rising almost three times of GDP by 2020.

This decade would also see a shift towards more market-based financing, whereby by 2020, more than half of this total financing is expected to be raised through financial markets from 46 per cent in 2010.

Financing based on Islamic principles would also grow to account for 40 per cent of total financing in 2020 from 29 per cent in 2010.

"Key to supporting the growth and advancement of the financial industry is a steady stream of competent and dynamic talent, whereby an additional workforce of 56,000 would be needed in 2020 from 144,000 last year," Bank Negara said.

This addition would be needed to fulfil the talent demands in critical areas such as risk and wealth management, Islamic finance and investment advisory services.

The central bank said that Malaysian financial institutions are also notching up a stronger global presence, having chalked up a pre-tax profit of RM2.3 billion from their overseas contributions from a loss of RM108.8 million in 2002.

Besides setting up financial conglomerates, investment banks, insurance and reinsurance firms and takaful operators, they have also advanced their regional footprint via acquisition or setting up subsidiaries, branches or joint ventures to tap regional growth prospects.

It also gave top marks to the development of Islamic finance, which had witnessed significant strides to the extent that the Islamic banking industry today has expanded to 22 per cent of the overall banking sector from only 6.0 per cent in 2002 and the sukuk market accounting for 55 per cent of the debt securities market.

"Malaysia has now also emerged as a leading international hub for Islamic finance," Bank Negara said.

Malaysian financial markets are among the more developed markets in Asia, with the size of the debt securities market having grown to RM867 billion or 105 per cent of GDP in 2011, making it one of the larger debt securities markets in Asia.