Bank Negara Malaysia (BNM) has released its latest Financial Sector Blueprint 2022-2026, which features as its fifth strategic thrust a focus on advancing value-based finance through Islamic leadership.
The five-year blueprint, the third of its kind that follows the 2001–2010 masterplan and the 2011–2020 blueprint, was launched by the central bank during the launch of MyFintech Week 2022, and outlines the strategies for the development of Malaysia’s financial sector, driven by three outcomes: finance for all, finance for transformation and finance for sustainability.
As a powerhouse Islamic finance jurisdiction, it comes as no surprise that a focus on Shariah finance features heavily in the new blueprint. It aims to sharpen Malaysia’s proposition as an international gateway for Islamic finance through the further deepening of the Shariah financial and capital markets; strengthen innovation efforts in developing new Shariah compliant value-based business models, solutions and practices; and facilitate the mainstreaming of social finance as an integral part of the Islamic finance ecosystem.
“In positioning Malaysia’s Islamic finance gateway, we will pursue two areas of specialization: First, a greater focus on opportunities in sustainable finance … Second, greater integration of Islamic finance with the Halal industry, particularly in financing Halal trade and investment,” the Malaysia International Islamic Financial Centre, an initiative of the country’s regulators, said.
Also a key factor in meeting these goals is the development of a more conducive regulatory environment that will facilitate more diverse Shariah contracts. As an example to this, the central bank cites the goal of exploring the recalibration of regulatory requirements in Takaful, particularly in relation to Ta’awun. “Current regulations restrict the transferability of distributable surplus across Takaful funds in meeting the capital requirements, due to separate fund ownership for Takaful. An expanded application of Ta’awun may allow distributable surplus in a Takaful fund that is sufficiently capitalized to support shortfalls in another Takaful fund.”
In his speech during the launch of the blueprint, Malaysian Finance Minister Tengku Zafrul Aziz said that key expected outcomes include advancing the digitalization of the financial sector. “I also look forward to the upcoming entry of digital banks, digital insurers and Takaful operators. Their impact to the development of the nation through the use of technology and the introduction of innovative financial solutions will improve the well-being of Malaysians, foster greater efficiency and contribute towards a more competitive landscape.”
The new blueprint comes ahead of BNM’s issuance of five digital banking licenses to successful applicants by the second quarter of 2022.