In the last decade Islamic finance has gained tremendous traction the world over as a viable alternative to conventional banking and finance. The recent global financial crisis has further enhanced its allure as it slowly but steadily begins to provide a real and practical alternative to the conventional financial system.
Likewise, there has been a strong surge in Islamic risk management products, with industry experts forecasting that the value of the global takaful industry could breach USD$15 billion by 2018.
Malaysia is in the enviable position of being on the cutting edge of this industry, having offered Islamic financial services since the early 1980s and making early inroads in the takaful market through the enactment of the Takaful Act in 1984.
Clearly, Malaysia's leadership in Islamic financial services is undisputed, even as other financial centres clamour to offer Islamic finance and banking in the wake of the credit crunch.
In tandem, Labuan IBFC has benefitted from the growing take up in Islamic Finance. Coupled with its efficient domestic taxation structure, the extensive double taxation treaty network confirms Labuan IBFC's niche as a well established international Islamic financial centre.
In 2009, as the world languished in a recession, the Islamic banking sector in Labuan IBFC saw an increase of 14.5%, generating total deposits of USD386.4 million for the year.
Although the growth in the Labuan Islamic capital market was modest, it was the increase in takaful and retakaful contributions which showed the highest growth of 44.2% year on year, amounting to USD$234.1 million.
As of end 2009, there were 5 fully fledged retakaful companies, 9 retakaful windows and 10 retakaful brokers on Labuan IBFC. A chart below shows the growth of the takaful and retakaful operations in Labuan IBFC for financial year 2009, and illustrates clearly a growing and dynamic market.
It is expected with the recent enactment of Labuan Islamic Financial Services Act 2010 - the world's first omnibus act covering all aspects of Islamic financial services, the takaful industry will receive a further boost as the provisions within the Act streamlines all aspects of takaful and retakaful operations.
In addition, this Act also clarifies and streamlines procedures and requirements for the establishment of all Islamic financial entities and products, for example it standardises requirements in areas such as the seed capital and business activities deemed...