Reforms give Islamic banks growth opportunities

KUALA LUMPUR: Financial reforms in Malaysia could spur the growth of the country's Islamic banks by giving them more opportunity to tap into rural areas, which have a greater proportion of Muslims than urban centres. But concerns about profitability may slow the expansion. The central bank issued new agent banking guidelines this month that expand a pilot programme allowing lenders to offer basic financial services through non-bank retail outlets. “It will be a cost-effective channel for financial institutions to reach out to the underserved parts of the population, particularly those in rural areas,” said central bank governor Tan Sri Zeti Akhtar Aziz. The guidelines list 474 rural districts, or mukims, which can be serviced through the initiative; some of them have the highest proportions of Muslims in the country, and also the lowest average household incomes. This could give Islamic banking an important role in the Government's efforts to expand financial services to the poorest sections of the population. The populations of the states of Kedah, Kelantan, Perlis and Terengganu are on average 89.3% Muslim, much higher than 46.4% for the capital Kuala Lumpur, data from the Department of Statistics shows. - Reuters source: http://biz.thestar.com.my/news/story.asp?file=/2012/8/25/business/11912542&sec=business