The Malaysian Islamic Capital Market will continue to see product innovation, moving away from the adaptation of conventional products.

With the introduction of new market participants, such as multilateral development banks, multilateral financial institutions and local and foreign multinational corporations, the market has witnessed product innovation, said RAM Rating Services Bhd in its "Malaysian Sukuk Market Handbook".

Furthermore, Islamic products will increasingly be structured on Islamic principles that are widely accepted in global markets, it said.

Malaysia has a facilitative regulatory framework, for Islamic investment product and services, including the issue of sukuk, it added.

RAM chairman Tan Sri Siti Norma Yaakob said in the handbook that the current stage of evolution for Islamic finance features innovations in various Islamic capital-market products, which are becoming increasingly more complex and sophisticated.

"With the expanding scope of activities in Islamic finance, the Islamic bond or sukuk market is fast becoming an essential platform for fund-raising and investment activities," she said.

Initiatives and added measures under the Malaysia International Islamic Financial Centre (MIFC) platform will encourage both domestic and international financial market participants to become MIFC service providers, RAM said.

By making Malaysia as the regional hub in the process, service providers will greatly enhance their market reach and expand their customer bases in this part of the world, it said.

The Malaysian government launched the MIFC initiative in August 2006 to maintain the country's edge in the area of Islamic finance.

The foundations for the sustainable development of Islamic finance in general and sukuk market in particular have now been put in place, according to RAM.

The development of the sukuk market in Malaysia has entailed extensive and wide-ranging measures, which include creating an efficient issuance process, enhancing the price-discovery process and settlement system, establishing a benchmark yield, broadening the investor base, promoting liquidity in the secondary market and fortifying the legal, regulatory and Syariah frameworks, it said.

Kuwait Finance House said in the handbook that having expanded by leaps and bounds in the past few years, Islamic markets seem to be entering a mature phase.

The debate, according to Kuwait Finance House, is whether the Islamic finance industry wants to set itself as a unique and innovative form of Financing or to replicate what have already been established by the conventional markets.

- Bernama omar1.1 iimm.bnm.gov.my