Malaysia will ease its rules to allow all banks to do Islamic banking business in foreign currencies, the central bank said Tuesday, further cementing the country's role in Sharia financing.

Non-Islamic commercial bank and investment banks licensed by the government will now be allowed to do Islamic banking business as the country aims to position itself as a global hub for the sector, central bank chief Zeti Akhtar Aziz said in a statement.

"We want and aim to develop Malaysia into a centre for the origination, distribution and trading of sukuks (Islamic bonds) to provide further impetus to the development of an increasingly vibrant and progressive bond market in Malaysia as well as in the Asian region," Zeti said.

However, according to Islamic finance strict rules, interest payments and profits earned from alcohol, pornography, pork or gambling are still banned.

Muslim-dominated Malaysia has the world's largest Islamic bond market, accounting for about 47 billion dollars or two-thirds of total Islamic bonds outstanding worldwide.

Its Islamic finance industry is worth 38 billion dollars in assets ranging from stocks and insurance to home loans and pawn-broking.

Islamic banking assets also make up over 12 percent of total bank assets, the central bank said.

In remarks at an Islamic banking forum Monday, Zeti said Islamic bonds are increasingly becoming more important in channelling funds into emerging market economies.

"This is particularly the case for the Middle East and Asia, which are among the fastest growing regions in the global economy," Zeti said.

"This includes financial needs of the private sector following the privatisation and implementation of infrastructure projects."

The Islamic bond market, she said, was growing by an average of 40 percent yearly, and demands for bonds "significantly exceeds supply."

Since Malaysia's first issuance of sovereign global Islamic bonds in 2002, there have been a series of other issuance by countries such as a United Arab Emirate, Qatar, Bahrain and Pakistan.

Multilateral lending agencies have also issues such to finance development projects, with Islamic bonds now catching on as an "attractive instrument of financing," the central bank chief said.

Meanwhile, Securities Commission senior director Nik Ramlah said efforts were being made by Malaysia to attract more Islamic capital market intermediaries.

Currently, Malaysia has broad-based intermediaries to meet investors and issuers' needs in the form of investment banks as well as local and foreign Islamic banks.

"Efforts are being undertaken to attract more," she said.