Islamic finance pioneer Malaysia is looking for new drivers to reignite growth for its $286 million industry.
Sustainable finance and digitization of services will lead the way, with lenders expected to adopt technologies such as artificial intelligence and big data to break into under-served markets, said Bank Negara Malaysia Assistant Governor Adnan Zaylani Mohamad Zahid.
The Shariah finance industry is at a crossroads after global interest tapered following a burst of Sukuk offerings from non-Islamic countries such as the U.K. and Hong Kong more than five years ago. Players are now seeking to carve a niche in socially responsible finance, with the likes of Malaysia offering dollar Sukuk linked to sustainable activities over the past year.
Bank Negara Malaysia and the Securities Commission, the nation’s markets regulator, will host the Royal Award for Islamic Finance 2022 on Oct. 4. Excerpts from Adnan Zaylani’s emailed interview:
On sustainable finance:
“Significant mobilization of funds is required to support Malaysia’s efforts to build climate and social resilience. We see Islamic financial institutions be at the forefront of advancing the sustainability agenda by scaling up offerings of value-based solutions and leveraging value-based intermediation works. Bank Negara Malaysia will work with Islamic financial institutions to ensure the regulatory environment is conducive for industry innovation.”
On the halal economy:
“By leveraging Malaysia’s competitive advantage in the halal economy, we see the potential for Islamic finance players to further expand their footprint across Asia and OIC countries through halal trade and investment facilitation, including market expansion and offering of ancillary services. Bank Negara Malaysia will continue to facilitate new and strengthen existing global partnerships that support the nation’s halal agenda.”
On digitalization of financial services:
“Islamic financial institutions should step up the adoption of emerging technologies such as artificial intelligence and big data to tap into new opportunities in under-served markets. Bank Negara Malaysia will strengthen key infrastructures to ensure the ecosystem remains vibrant for digitalization, including enhancements to regulatory sandbox to accelerate time to market for digital innovation.”
On sustainable development goals:
“We see Islamic finance with the potential to play a significant part in supporting the sustainable development goal (SDG) commitments. A large financing gap needs to be filled to realize the SDGs in developing nations, which is estimated to be between $2.5 trillion to $3 trillion annually. OIC countries alone need about $1 trillion annually to implement the SDGs.
In Malaysia, green and SRI Sukuk issuances have served as a bridge between Islamic finance and sustainable investment. As of February 2021, a total of $2 billion green and SRI Sukuk has been issued since its launch in 2014.”
Below are the growth rates for Malaysia’s Islamic finance industry, as provided by the central bank:
Originally published on www.bloomberg.com