Value-based intermediation will lift Islamic banking to a higher level, says BNM

PUTRAJAYA, 22 Jun -- Gabenor Bank Negara Malaysia (BNM) baharu Datuk Nor Shamsiah Mohd Yunus. Nor Shamsiah dilantik sebagai Gabenor BNM bagi tempoh lima tahun berkuat kuasa 1 Julai, 2018 sehingga 30 Jun, 2023. --fotoBERNAMA (2018) HAK CIPTA TERPELIHARA

KUALA LUMPUR: Bank Negara (BNM) expects the adoption of value-based intermediation (VBI) to have a significant impact on business models of Islamic financial institutions.

BNM governor Datuk Nor Shamsiah Mohd Yunus said post-financing expert advisory services that help borrowers mitigate the environmental impact of projects financed by banks, will feature more prominently in the product and service offerings of VBI banks.

“VBI-oriented Islamic financial institutions can, and indeed should, also play an important role in mobilising resources to finance climate change mitigation and adaptation initiatives,” she said in her  keynote address at the Global Islamic Finance Forum 2018 today.

“Funding for climate adaptation in particular, remains critically low, despite millions already at risk from the effects of climate change and in need of assistance to cope with the effects,” Shamsiah said.

VBI is a major agenda under BNM’s latest move to lift Islamic banking to a higher level. Underpinned by syariah as its moral compass, VBI encourages good and ethical behaviour.

As an example, Shamsiah noted that in the agriculture sector, resources can be channelled towards building flood defences, and developing local structures and facilities that are more resilient to harsh weather conditions.

“Takaful solutions also have an important role in strengthening resilience against climate events.”

She said two new tools will be published by BNM today for public consultation - a VBI Impact Assessment Framework (VBIAF) and the VBI Scorecard.

“The assessment framework provides guidance on the assessment of financing and investment applications taking into consideration economic, social and environmental impacts, while the scorecard supports the implementation of performance measurement frameworks for Islamic financial institutions that drive positive value and impact on society and the environment.

“I look forward to receiving constructive feedback from the industry and interested parties and to further strengthen these frameworks to drive a renewed focus on sustainable financial solutions.”