Islamic Finance set to revitalise the economy with three core principles - BNM

KUALA LUMPUR, Nov 5 (Bernama) -- Islamic finance holds substantial potential to revitalise the economy through three core principles—Maqasid Shariah, innovation, and global integration, said Bank Negara Malaysia (BNM).

BNM Governor Datuk Seri Abdul Rasheed Ghaffour outlined these principles as embedding Maqasid Shariah in economic and sustainable reforms, advancing innovation for value-based solutions, and enhancing global integration for mutual development and shared prosperity.

"I commend the Malaysian Islamic finance industry for leaping forward more than half a decade ago to embrace Value-based Intermediation (VBI). Stronger implementation of VBI requires concerted efforts and holistic alignment across all key stakeholders.

bootstrap slideshow

"In particular, shareholder stewardship is vital to ensure the transformative impacts of value-based finance are widely seen and felt," he said in his opening address at the 19th Kuala Lumpur Islamic Finance Forum 2024 (KLIFF 2024) here today.

The forum aims to serve as a platform for debate, discourse, and solutions based on knowledge and experience, while enhancing branding appeal and reaching out to Islamic finance leaders in the Asia-Pacific region.

KLIFF 2024 features key highlights, including the 19th KLIFF Main Forum from today until tomorrow, and the 17th KLIFF Shariah Forum, or Muzakarah Penasihat Syariah Kewangan Islam 2024, on Nov 7.

bootstrap slideshow

Abdul Rasheed emphasised the need for the industry to explore a full range of Shariah contracts and instruments to drive financial innovation and address real-world challenges.

He noted that blended finance has significant potential to expand access to finance for underserved and unserved segments, leveraging social finance capital, such as zakat and waqf, in conjunction with traditional financing.

Moreover, the prospects of technology and digitalisation continue to expand, and the central bank will support financial innovation by adopting an activity-based approach and proportional regulation.

"Also, the industry should capitalise on the opportunity to maximise the diverse applications of Shariah contracts by leveraging the issuance of the Broader Application of Ta’awun Exposure Draft and the upcoming Shariah Contracts Framework Consultation Paper.

"Optimal use of these tools is imperative to advance value-based innovation," he added.

Regarding Budget 2025, Abdul Rasheed noted that the allocation of RM100 million in matching funds for risk-sharing structures signals a strong commitment by the government to foster financial innovation.

"I implore the industry to seize the opportunity to innovate through risk-sharing product offerings, particularly to fund climate transition and food security initiatives," he said.

Furthermore, Malaysia’s ASEAN Chairmanship will focus on deepening regional collaboration to support the sustainability agenda of ASEAN countries, presenting new growth opportunities to integrate Islamic finance with climate change and transition finance initiatives.

On global integration, Abdul Rasheed highlighted the rapid expansion of the global Islamic finance market, which is attracting an increasing number of international investors and driving economic growth across multiple regions, including emerging markets such as the Philippines, Central Asia, and North Asia.

Thus, Islamic finance players could expand their footprint and global outreach, encouraging greater cross-border investments and collaboration by capitalising on these opportunities.

-- BERNAMA