The documents discuss the implementation of a value-based intermediation (VBI) system, creating a financing and investment framework, and a VBI scorecard. These documents build on the Strategy Paper on VBI which it released in July 2017.
Bank Negara Governor Datuk Nor Shamsiah Mohd Yunus said the industry in Malaysia has been taking concrete steps to drive strategies to increase the positive impact of finance on society with the support of the central bank.
"The commitment to adopt VBI is a significant step by the industry to clearly identify Islamic finance with sustainable practices, as it should," she said in a keynote address at the Global Islamic Finance Forum 2018 (GIFF2018) in Kuala Lumpur.
Islamic banking assets take up 30% of all banking assets in Malaysia, but the growth rate has since slowed, signalling the need for a fresh direction. Themed Beyond Profit, GIFF2018 encourages the banking industry to progress from shari'ah-compliant banking towards a more holistic practice of shari'ah-based financing that generates a positive impact on the economy, community and environment.
"The Islamic finance industry today faces a strategic choice - to either continue on a path that largely ignores the stark social and environmental realities that confront humanity, or to thoughtfully chart a new path that fully embraces the idea and philosophy of finance beyond profits.
"The latter will be an unfamiliar path in many respects, but one that is far closer to the fundamental premise of Shariah on which Islamic finance is based upon,” Nor Shamsiah said.
She said it will require a rethinking of the concepts of value and risk, and human capital needs. Rethinking value will have a significant impact on how Islamic banks make decisions, and to the banking portfolios. For example, expert advisory services to help borrowers mitigate the environmental impact of projects would then be a larger part of a banking portfolio.
On the rethinking of risk, Nor Shamsiah said non-traditional forms of risks such as social, political and environmental risks are business threats, and there are material benefits to managing these risks." As natural stewards of sustainable finance models, Islamic financial institutions are well placed to develop richer perspectives of social and environmental risks," she said.
As for human capital, she said there has to be concerted focus to build the skillsets to implement sustainable financing including at the management levels. This includes engineering and technical skills in the design, construction and assessment of technology; science skills; and monitoring skills.
Dato’ Adissadikin Ali, President of the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM), the organiser of GIFF2018, said nine of the 27 Islamic financial institutions in Malaysia have adopted the VBI system.
"It is on a voluntary basis, and the form and manner will differ between the institutions," he said.
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Read the Suroor Asia blog post on VBI discussions at GIFF2018.