Growth of Malaysia’s Islamic banks outpacing conventional peers – Moody’s 

Inve$t | Market Sentiments | 13 October 2023

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According to Moody’s Financial Institutions Group analyst Wong Chong Jun, the growth of Islamic banks in Malaysia has outpaced its conventional peers, with penetration growing tremendously over the past 10 to 15 years and now accounting for around 40% of the total financing in Malaysia. The penetration rate stood around 20% around 10 to 15 years ago. 

Islamic banking growth in Malaysia is mainly driven by government policies as well as the ‘Islamic First’ strategy employed by the banks. He was speaking at the 2023 Global Islamic Finance Industry Update Media Roundtable held online on Oct 11. 

On the “Islamic First” strategy, which essentially means prioritising Islamic banks and Islamic products, it was observed that there had been a significant increase in Islamic banking products market share in Malaysia’s major banks. A look at the breakdown of loans just for Maybank in Malaysia, Islamic financing shows that it contributed around 70% of the loans. This proportion was actually at around 60% just a couple of years ago, prior to the (Covid-19) pandemic. Looking at another major bank in Malaysia, RHB, the proportion has increased to around 45% from 40% over the same period. 

The government has been very supportive of Malaysia’s Islamic banking industry, which has been reflected in the multiple policies announced and implemented over the past few years. Among the policies enacted include the value-based intermediation framework established in 2018 and the Halal Industry Master Plan 2030, which was released earlier this year. In addition to that, in the Madani Economy, there are plans for Malaysia to be a leader in Islamic financing. Even for digital banks, the allocation was two out of five for Islamic digital banks. It is very clear that the government is taking steps to enhance and to develop the Islamic banking market in Malaysia. 

Malaysia’s first 5G-powered AI warehouse powered by CelcomDigi and DHL Supply Chain 

Malaysia’s first 5G-powered Artificial Intelligence (AI) Autonomous Inventory Management System powered by CelcomDigi Bhd in collaboration with DHL Supply Chain Malaysia was launched by Communications and Digital Minister Fahmi Fadzil on October 12. 

Supported by CelcomDigi’s 4G LTE network and 5G connectivity at DHL’s Integrated Logistics Centre, the warehouse is equipped with the latest AI and robotic solutions for optimised and efficient inventory management. 

According to Fahmi, the synergy between CelcomDigi and DHL which utilises the real value of 5G technology and solutions, together with AI and robotics is commendable and on the right track for driving the growth of the nation’s digital ecosystem. Aligned with the government’s digital aspiration, Malaysia has the potential to be the Asian Digital Tiger as collaborations such as this will potentially expand and significantly enhance the efficiency, innovation, technology adoption in Malaysian enterprises and the nation’s digital economy. He was speaking while officiating at the launch. 

The warehousing and logistics industry has the potential to be reimagined and transformed into a “lights-out” warehouse, being able to operate around the clock by utilising 5G technology and AI solutions. He was pleased to note that this implementation will not stop here and both organisations are committed to expanding the adoption of 5G technology and solutions across DHL warehouses nationwide as well as potentially collaborating with organisations from other industries. With innovation and technology being utilised within and across industries, he looks forward to more digital transformation initiatives. 

CelcomDigi’s collaboration with DHL leverages 5G technology and AI solutions for robotic inventory management systems, providing an enhanced and efficient multi-storey warehouse management at optimum standards. The solution will enable efficient stock counting operations, achieving up to 20 times efficiency with up to 100% precision and accuracy, enhancing space utilisation within the warehouse and reducing daily electricity consumption. 

He added that DHL is currently working on 25 warehouses across the country and is building a warehouse in Bayan Lepas, Penang that will operate as a fully automated facility using the latest 5G technology. He hopes more companies will identify and understand the benefits of 5G technology to their respective industries to help improve business efficiency and productivity. 

PIKOM expects strong contribution from digital economy in 2023, 2024 

According to the National Tech Association of Malaysia (PIKOM) deputy chairman Alex Liew, Malaysia’s digital economy is anticipated to contribute 24.4% to GDP in 2023 and rise further to 25.5% in 2024. The momentum will hold its strength amid the national economy forecast to grow 4.5% in 2024. 

Speaking at a press conference on Malaysia’s Digital Job Market and Economic Outlook 2023/2024 on October 12, he said the robust escalation of the digital economy, even amid global economic upheavals, has cemented its position as a crucial pillar of Malaysia’s economic structure. 

On the employment front, the digital job market has witnessed double-digit growth in tech salaries, mirroring an economy that is judiciously harnessing technology for heightened efficiency and productivity. 

Meanwhile, according to PIKOM advisor and research chair Woon Tai Hai, the tech sector has experienced a notable y-o-y salary growth of 13.9% in 2023, a stark contrast to the two per cent percentile range growth observed in the previous two years. PIKOM is projecting a 4.13% salary growth for 2024 in the sector, and an average annual growth rate of 6.45% over the next decade. 

He attributed this to the intensified competition for talent, the repatriation of skilled professionals post-pandemic, a weakening Ringgit, accelerated digital transformation in the private sector and forward-thinking government policies. 

PIKOM’s chief executive officer Ong Kian Yew said the benchmarking of technology salaries is pivotal as it serves as a lens through which Malaysia’s competitive standing within the global and regional tech landscapes can be viewed, thereby nurturing innovation and informed policy-making. PIKOM’s membership comprises more than 1,000 companies involved in tech products and services which command 80% of Malaysia’s total tech business. 

Eye On The Markets 

On Thursday (12Oct), the Ringgit closed at 4.7170 against the USD and 3.4627 to the Sing Dollar. On Monday (09Oct), the FBM KLCI opened at 1417.06. As at Thursday (12Oct) 5:00pm, the FBM KLCI closed up 26.76 points at 1443.82. Over in US, the overnight Dow Jones Industrial Average closed down 173.73 points (-0.51%) to 33,631.14 whilst the NASDAQ shed 85.46 points (-0.63%) to 13,574.22. 

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