Diversification of Islamic Financial Insturments
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 Malaysia is the first country which introduced in 2002 the first sovereign Sukuk, which
was subscribed more than twice of normal Sukuk subscription.
 In 2004 Federal Budget, Malaysia implemented a comprehensive incentive package for
Islamic securities which has similar function to conventional securities in order to
promote Islamic capital market instruments. (Bursa Malaysia: 2011)
The development of Islamic capital market in Malaysia is different from the development of
Islamic capital market in other countries around the world. This is because Malaysia has
special concern and support not only from market players and investors but also from the
government of Malaysia in order to make Malaysia a hub of Islamic financial market
particularly Islamic capital market which plays an important role in the growth of economy of
any country.
Hence, Sukuk is regarded as very active instrument in Islamic capital market, where Malaysia
is still leading the Sukuk market issuance. Malaysia has issued multicurrency Sukuk US Dollar,
Chinese Renminbi, Singapore Dollar and Japanese Yen. In the first quarter of 2015, Malaysia
sustained its position as the leading issuer of Sukuk. Issuances from Malaysia accounted for
42.3% of total issuances, followed by the United Arab Emirates (18.2%), Bahrain (14.2%) and
Indonesia (14.1%), respectively. The Government of Malaysia issued the world’s first 30-year
sovereign Sukuk in April 2015 based on the principle of Wakala bi al-Istithmar. The offering
marked Malaysia’s fourth US dollar-denominated sovereign global Sukuk issuance, following
its successful global Sukuk issuances in 2002, 2010 and 2011. The issuance consists of a USD1
billion 10-year (due 2025) and USD500m 30-year Trust Certificates (due 2045).
Malaysia continued to lead the issuance of sovereign Sukuk in the global market. The
Malaysian Sukuk market, including local currency and foreign currency denominated Sukuk,
reached USD161.3 billion at end June 2015. An increase from USD58.8 billion in 2008 with an
annual growth of 16.8%. At end June 2015, the total outstanding amount of Malaysia’s
government Sukuk reached USD67.4 billion, an increase from USD15.8 billion in 2008. In
addition, the share of government Sukuk to Malaysia’s aggregate Sukuk market increased from
a share of 26.8% in 2008 to 41.8% at end June 2015. As for the corporate Sukuk market in
Malaysia also continued to exhibit steady growth. Total outstanding corporate Sukuk reached
USD93.9 billion at end June 2015, more than double the amount of USD43.0 billion in 2008.
Malaysia’s local currency corporate Sukuk now dominate the local currency corporate bond
market with a share of about 72% of the total market. 121
3.8.5 TAKAFUL (ISLAMIC INSURANCE) IN MALAYSIA
Takaful represent an important component in the composition of the financial system in
Malaysia. Takaful is integrated in the banking and Islamic capital market, through the
investment of Takaful, where they hold many investment assets in Islamic capital Market
product, and other investment link product through the banking channel. The structures of the
Takaful products, along with their contracts are listed as follows:
121 IIFM Sukuk Report 2016