Malaysia could issue more Islamic banking licenses, central bank governor Zeti Akhtar Aziz said today, in a move that would boost the country's aspirations of becoming an Islamic banking hub.

Zeti said Bank Negara, Malaysia's central bank, had a number of applications for Islamic banking licenses currently being processed but for the time being the total number on issue would remain at seven.

"Yes there are," she said when asked if more such licenses were being considered for local banks. "It's in the pipeline, you'll have to wait until the announcement is made. There are applications in the pipeline."

Zeti declined to elaborate on the number of applications.

Malaysia, largely Muslim but with sizeable Chinese and Indian minorities, is a leader in Islamic banking after introducing the service in 1983 which provides products and services that comply with Syariah or Muslim religious laws banning the earning of interest.

On the fast track

Kuala Lumpur has also fast-tracked the liberalisation of the Islamic financial sector to take advantage of an estimated trillion dollars of Muslim funds said to be seeking new investment homes amid the uncertainties in the Middle East after the Sept 11, 2001, attacks on the United States.

Of the seven issued since 2003, four were to local banks while the remaining three went to Middle Eastern banks including Saudi Arabia's largest bank, Al Rajhi Banking and Investment, a consortium led by the Qatar Islamic Bank and Kuwait Finance House.

Zeti said Bank Negara was monitoring to "see how the situation develops" in regards to foreign banks and the three licenses already issued.

"We've issued three new licenses and they have yet to be operationalised. We expect at least one of them will be operationalised later this year," she told reporters at the launch of the Malaysian Hong Leong Group's Islamic Bank.

Hong Leong's Islamic Bank, is the latest player in the Islamic financial services sector and has total assets of more than RM5 billion.