Is Malaysia set to become the global centre of a new breed of Islamic finance outsourcing services? Recent research from ValueNotes, a Pune, India-based research firm suggests that this is the case.

Otherwise known as Shari'ah banking, Islamic finance is a system of banking consistent with the principles of Islamic law (or Sharia), which prohibit the payment or acceptance of interest fees for the lending and accepting of money, as well as investing in businesses that provide goods or services contrary to Islamic principles.

In its recent research, ValueNotes points out that the rapid growth of Islamic finance in the past 30 years has sent global banking giants, such as HSBC and Standard Chartered, scrambling to develop their own offerings for Muslim clients. The result is that Islamic finance is now offered in more than 75 countries worldwide. Total assets invested in this way, meanwhile, totalled between $750 billion and $800 billion in July 2009, according to a study conducted by the Federal Reserve Bank of San Francisco. By 2010, they should reach a staggering $1 trillion.

ValueNotes analysts think Malaysia is well-positioned to tap into the outsourcing needs of banks that offer Islamic finance services. Along with Iran and Saudi Arabia, Malaysia is one of the leading players in Islamic finance. The country currently has 17 registered Islamic banks, so there are plenty of people there with skills and experience to offer.

There are other positive signs, too. Maveric Systems, a software testing service provider, recently launched its own Malaysian operations in order to offer services in the Islamic finance domain. Along with setting up a center in Malaysia, the company has also partnered with Malaysia University of Science and Technology (MUST) to roll out courses and training modules in line with Islamic finance and software testing.

Overall, the Malaysian outsourcing industry has been growing 15% annually and will reach $1.1 billion for 2009, growing to $1.9 billion by 2013. Apart from a few small research companies offering services such as data collection and data processing to Islamic banks, Islamic finance is one of the niche segments in Malaysia that, as yet, remains untapped, say ValueNotes' researchers.