KUALA LUMPUR: Financing for catalytic priority sectors has remained relatively modest despite strong policy ambitions in national master plans, with lending approvals continuing to be concentrated in services, said Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour.
He said financing for manufacturing has improved over time but remained limited relative to the scale of investment required to build globally competitive industries.
"These frictions do not reflect a lack of willingness on the part of banks.
"Rather, they point to information gaps, structuring complexity and capability as well as sector familiarity, and these are gaps that we can collectively address,” he said in his speech at the ‘FIDE Forum: Advancing Islamic Finance as Part of the National Agenda’, here today.
Abdul Rasheed said Malaysia’s national strategies had set a clearer direction for the capabilities and investments the country needed to build, but a gap remained between those ambitions and financing outcomes.
"Perhaps a more important question for us to answer today is: are we still financing yesterday’s economy, or are we positioning ourselves for the next one?” he added.
He said Islamic finance, now a significant part of Malaysia’s financial system, needed to lead in addressing that challenge and ensure its scale translated into greater relevance to where the economy was heading.
As economic activity becomes more complex, traditional financing approaches might no longer be sufficient, requiring more sector-focused solutions, longer investment horizons and structures that can accommodate different risk profiles, he said.
Abdul Rasheed noted that over the past decade, Islamic banking’s share of total financing had nearly doubled from 25 per cent in 2015 to 48 per cent.
"This growth is not only relative. We see similar depth in the Islamic capital market. Its size has increased from RM420 billion to RM670 billion during the same period, while its market share has remained dominant at above 60 per cent.
"Islamic finance is therefore no longer at the periphery of the financial system; rather, it is one of its principal channels of intermediation,” he said.
He highlighted that Islamic finance’s strengths in risk-sharing, broader sources of capital and adaptable structures give it a natural advantage, particularly in meeting longer-term or more specialised financing needs that may be less well served by conventional approaches.
"That is where I believe the next phase of Islamic finance needs to be anchored — not in novelty, but in relevance and impact that we can bring to the economy. This goes back to the fundamentals behind the Value-based Intermediation initiative,” he said.
Abdul Rasheed said that while the industry's existing capabilities have served it well in established sectors, new capabilities may be needed to support emerging growth opportunities.
"This requires us to think about capability across the entire financing value chain. The objective is not to build every capability, but to build depth in areas most relevant to the institution’s strategic priorities.
"This includes sector and technology intelligence to assess newer business models and risks; more sophisticated structuring to support differentiated financing needs; patient and risk capital to complement traditional balance-sheet financing; and stronger execution capability across talent, data, systems and internal processes,” he said.
At the same time, he emphasised that the next phase of Islamic finance cannot be delivered by industry leaders acting separately.
"It will require collective stewardship, with each part of the institution taking responsibility for where Islamic finance goes next. In this regard, no single institution can pursue every opportunity,” he added. - Bernama
