The merger of Islamic banking units in Malaysia is crucial as the market is becoming overcrowded with players hungry for growth, Datuk Seri Zukri Samat outgoing BIMB Holdings Bhd group chief executive officer has said.

According to him, the creation of a couple of mega Islamic banks could rival not only other Islamic banks in the country, but also the ‘big boys’ from the conventional side such as Maybank and CIMB. Mega Islamic banks will have huge potential to spread their wings off the Malaysian shores into Indonesia, Cambodia and Singapore to become a regional champion, he said.

“All together, we have 16 banks offering Islamic financial products. For a small country like Malaysia, it’s a bit overcrowded. So long as we are small and fragmented, it is difficult to grow. Probably there could be some form of merger among Islamic banks, just like the conventional banks did during the 1997 financial crisis. The time is right for a merger,” he told Bernama.

Following 1997-1998 Asian financial crisis, Bank Negara Malaysia took tighter measures by calling a massive consolidation of 58 financial institutions, comprising 21 domestic commercial banks, 25 finance companies and 12 merchant banks, into 10 anchor banking groups.

Thereof, the intervention helped improve Malaysia’s banking sector in terms of market position, efficiency and capital.

Similarly, Zukri believes that the consolidation of Islamic banks through a merger exercise could boost industry growth and help achieve the country’s aspiration to become a global hub for Islamic banking.

Read more at Borneo Post.