Malaysian mortgage firm Cagamas Bhd may help set up secondary Islamic mortgage companies in the Middle East and securitise loans from Gulf banks to tap rising demand for Islamic products in the region, its chief executive said.
Islamic banking players in mostly Muslim Malaysia are seeking overseas markets as a growing number of institutions compete for a modest market of 27 million people at home. Malaysian firms are especially eager to court an estimated $300 billion of petrodollars from the Middle East, but some Gulf investors have shunned Malaysian Islamic products, saying they do not fully meet sharia, or Islamic law, standards.
The $1 trillion Islamic banking industry has built a sizeable following world-wide on its premise of social and ethical investments that avoid interest-based banking, conventional insurance and sectors such as gaming, weapons and pornography. Cagamas chief Steven Choy said the firm is exploring ways to create Islamic products that are acceptable to Middle East investors, including purchasing loans from Gulf banks and then issuing bonds backed by those loans.
"If I could buy some assets from the Middle East that are globally or Gulf sharia-compliant and if I issue (bonds) out of here, there's no reason why they can't buy it back there," Choy told Reuters in an interview. Cagamas, which was among the world's 10 largest issuers of Islamic bonds last year, is studying the markets in Saudi Arabia, United Arab Emirates and Kuwait for this, he added.