Malaysia will allow foreign-currency Islamic bonds to be issued in its capital market in a move to promote itself as a global Islamic financial hub, the central bank said today.

"I am pleased to announce that resident and foreign issuers will now be able to raise foreign currency-denominated bonds, in particular Islamic bonds, in the Malaysian capital market," central bank chief Zeti Akhtar Aziz said.

Zeti said in a speech to regulators with Malaysia's Islamic International Financial Centre that the move will also enhance the Malaysian bond market.

"Foreign issuers who are eligible are the sovereigns, quasi-sovereigns, multilateral development banks, multilateral financial institutions and multinational corporations (MNCs) while resident issuers are local MNCs," she said.

Largely Muslim Malaysia is a leader in Islamic banking after introducing the service in 1983. The country is liberalizing its Islamic financial system and is also promoting itself as a center for education on Islamic finance.

Islamic financial practices ban the payment or receipt of interest or any transactions that include alcoholic beverages or gambling.