Fitch Ratings: Financing Growth of Islamic Banks in Malaysia to Outperform Loan Growth of Conventional Banks in 2020, despite COVID-19

Islamic banks’ financing in Malaysia grew 8.3% YoY in 2019, significantly outperforming the 1.6% loan growth of conventional banks in the same period, according to Fitch Ratings. The share of Islamic financing to total banking system loans increased to 35% in 2019 compared to 27% in 2015.

Fitch expects COVID-19 to have a similar impact on the asset quality of both Malaysia’s Islamic banks as well as the country’s conventional banks, given a comparable financing mix.

While the virus outbreak poses some level of downside risk to growth and asset quality across all banks in Malaysia, Fitch believes that Islamic banks have appropriate loss-absorption buffers which should...