Bank Negara: Priorities to build strong Islamic finance ecosystem in 2024 to support Malaysian's economic transformation

KUALA LUMPUR: Bank Negara Malaysia’s (BNM) priorities in 2024 are to build on Malaysia’s strong Islamic finance ecosystem.

As the Islamic financial system continues to mature, there is significant potential for the industry to support Malaysia’s economic transformation and deliver impactful solutions that can address the current and future needs of the economy and society.

In its Annual Report 2023 released today, BNM said it will continue to focus efforts on three areas, namely encouraging value-based finance innovation that embeds the fundamental values of Shariah, providing a more conducive regulatory and Shariah environment to accelerate market development, and continuously strengthening Malaysia’s proposition to tap global opportunities and deepen the domestic Islamic financial market.

The central bank said, in 2023, the efforts were taken to enhance the role and contribution of Islamic finance in supporting socio-economic developments in Malaysia which it collaborated with the Islamic finance industry to increase the adoption of value-based finance to meet the financial needs of consumers and businesses.

"Specific initiatives were implemented to spur innovative solutions through industry-led pilot projects and regulatory facilitation.

"In addition, we continued to pursue strategies towards advancing Malaysia as an international gateway for Islamic finance. This includes deepening Malaysia’s Islamic financial markets and international linkages,” it said.

BNM said that the Islamic banking and takaful industries continued to grow in 2023 with the Islamic banking industry’s share of total financing in the financial system increased from 44.5 per cent in 2022 to 45.6 per cent in 2023 whilst the takaful industry’s share of total net contribution increased from 23 per cent in 2022 to 23.4 per cent in 2023.

The central bank also noted that the Islamic banking and takaful institutions also remained resilient and well-capitalised, which has enabled the industry to continue to accommodate the financing needs of businesses, including small and medium enterprises (SMEs) and households, as well as provide protection coverage.

As outlined in the Financial Sector Blueprint 2022 to 2026, BNM said that among the key initiatives taken in 2023 to foster inclusivity, sustainability and positive social impact, was to facilitate the roll-out of a pilot project on impact driven Investment Accounts (IA), launched myWakaf 2.0 to effectively mobilise cash waqf towards community and economic empowerment, as well as expansion of CAKNA, a non-debt funding facility, including operational refinement to deliver effective assistance to SME vendors.

As for the role of BNM’s Shariah Advisory Council (SAC), the central bank said it continued to address a range of issues relevant to Shariah applications to provide clarity on the permissibility of several new Islamic financial transactions and arrangements, as well as helping to secure certainty and encourage continuous innovation in the development of Islamic financing solutions.

In 2023, BNM said it had also collaborated with key stakeholders to develop strategies to strengthen the Shariah talent ecosystem aimed at widening the talent pool and solidify the succession pipeline for the SAC and Shariah committees.

Meanwhile, Malaysia continues to be recognised as one of the leading markets in Islamic finance globally.

In 2023, BNM continued to drive the deepening of Malaysia’s Islamic financial markets with a focus directed towards developing the collateralised funding and derivatives markets.

Being part of the global Islamic finance community, BNM continued to participate in international and regional forums and fostering industry leadership of the Malaysia International Islamic Financial Centre agenda.

This includes improving the competitiveness of Malaysia’s Islamic finance industry, deepening financial linkages and delivering more impactful financial innovation, it added. - Bernama

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