BNM releases guidance on value-based intermediation for Islamic finance

The central bank of Malaysia, Bank Negara Malaysia (BNM), has issued guidance documents to encourage the nation’s Islamic financial institutions to adopt a value-based system. The aim is to generate positive social impact, while helping to propel the industry into a new growth pathway.

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.

Explore:

Read the Suroor Asia blog post on VBI discussions at GIFF2018.

Read BNM's October 2018 documents on VBI

Download BNM's Value-based Intermediation: Strengthening the Roles and Impact of Islamic Finance strategy paper, dated March 2018

Datuk Muhammad Ibrahim named as new Governor for Bank Negara Malaysia

The Yang di-Pertuan Agong of Malaysia, advised by the Prime Minister Najib Razak, has appointed Datuk Muhammad Ibrahim as the Governor of Bank Negara Malaysia for a term of five years, starting on 1 May 2016.

Source: BNM. Datuk Muhammad.

"I'm confident that under his leadership, Bank Negara Malaysia will continue assisting the government with advice to further strengthen Malaysia's economy, as well as managing monetary policy, and regulating and developing the financial services industry," said the Prime Minister.

"On behalf of the government of Malaysia, I would like to thank Tan Seri Dato' Seri Dr Zeti Akhtar Aziz for her excellent contributions during her tenure as the 7th Governor of Bank Negara Malaysia."

"The appointment of Datuk Muhammad Ibrahim as Governor is definitely positive for the country. Being part of our policy team at the bank will provide continuity and the much needed certainty in this prevailing period of great uncertainty. I have great confidence in his ability to lead the Bank going forward into the future," added Dr Zeti.

Datuk Muhammad called his appointment "an opportunity and call to serve the nation". "I will strive to carry out the duties of Governor of Bank Negara Malaysia to the best of my ability," he said. "It is important for the central bank to maintain monetary and financial stability, remain focused on its strategic agenda and work towards contributing to a better future for all Malaysians.

"I would like to also thank Tan Sri Dr Zeti Akhtar Aziz for her exemplary leadership and enormous contributions to the Bank and to the nation."

Datuk Muhammad has been Deputy Governor of Bank Negara Malaysia since 2010. As Deputy Governor he sits on Bank Negara Malaysia's Monetary Policy and Financial Stability Committees and is responsible for the development of the financial markets and  treasury operations including foreign exchange and reserve management of the Central Bank. His other responsibilities including oversseing the development of the banking including Islamic finance and insurance sector. 

Muhammad is responsible for promoting Malaysia's agenda of migration to e-payments,  aimed to generate cost and operational efficiency for businesses. He is additionally involved in collaborative efforts with the regional central banks to develop a multicurrency payment settlement platform aimed to enhance linkages in cross border transactions in trade and investment. He further serves as Chairman of the Finance Accreditation Agency; Board member of the Retirement Fund; member of the Malaysian Institute of Accountants; panel member of the National Trust Fund; and Senate Chair of the International Centre for Education in Islamic Finance.;

He holds a bachelor's degree in accounting from the University of Malaya and Master’s Degree from Harvard University. He also holds a post-graduate diploma from International Islamic University of Malaysia.

Bank Negara Malaysia makes it easy to contact Islamic finance companies

Bank Negara Malaysia has introduced a mobile app that connects consumers and financial service providers in Malaysia.

BNM MyLINK provides a directory of conventional and Islamic banking, insurance and takaful companies as well as SMEs which allow users to make enquiries, obtain advice and address their complaints.

Interested?

The app is available in both Bahasa Malaysia and English, and can be downloaded for free from the Apple App Store and the Google Play Store.

CIMB Principal Islamic Asset Management expects healthy 2014

CIMB-Principal Islamic Asset Management (CIMB-Principal Islamic) notes that the strong economic data release and the change of tone in the statement made by the Bank Negara Malaysia (BNM) during the May policy meeting raised expectations that a rate hike could arrive sooner rather than later. 

The first quarter of 2014 has seen gross domestic product (GDP) rise by 6.2% year-on-year, higher than consensus estimate, while BNM’s statement has highlighted the need to adjust the degree of monetary accommodation to counter the threat of financial imbalances.

Wong Loke Chin, Head of Fixed Income, ASEAN Region of CIMB-Principal Asset Management, said: “We expect the demand and supply to remain healthy in 2014 with year-to-date total new gross corporate debt issuances including sukuks standing at approximately RM32 billion. For the full year 2014, we are projecting the total new gross corporate debt issuances of about RM70 billion, which is smaller than the past two years, as issuers are currently adjusting to the potential higher interest rates.” 

Ramlie Kamsari, Chief Executive, CIMB-Principal Islamic said, “CIMB-Principal Islamic is dedicated and strives to provide the best service and guidance to our valued customers. We believe this ensures our relationship with our clients will be a long and satisfying one. With our commitment and support towards the Malaysia International Islamic Financial Centre’s (MIFC's) agenda to set the stage for Malaysia to position itself as a centre for the offering of Islamic financial products and services, CIMB-Principal Islamic will continue to provide a thought leadership standpoint to fortify our position as one of the leading global Malaysian-based shari'ah-compliant asset managers.”

As at 31 December 2013, CIMB-Principal Islamic’s assets under management stand at RM7.57 billion (US$2.31 billion). It manages one of the largest portfolios for global sukuk and domestic sukuk, having won breakthrough mandates in the UAE, Brunei and Saudi Arabia.