Bank Negara Malaysia’s Focus on Strengthening Islamic Finance in 2024
Bank Negara Malaysia (BNM) has prioritized enhancing Malaysia’s robust Islamic finance ecosystem in 2024. As the Islamic financial system matures, it holds significant potential to support Malaysia’s economic transformation and address both current and future needs of the economy and society.
In its Annual Report 2023, which was released this year, BNM outlined its continued focus on three key areas:
- Encouraging value-based financial innovation that adheres to Shariah principles.
- Creating a conducive regulatory and Shariah environment to accelerate market development.
- Strengthening Malaysia’s global position in the Islamic finance sector to tap into international opportunities and deepen the domestic market.
Advancing Islamic Finance in 2023
Throughout 2023, BNM made significant strides in enhancing the role and impact of Islamic finance in supporting Malaysia’s socio-economic development. Collaborating with the Islamic finance industry, BNM increased the adoption of value-based finance to meet the needs of consumers and businesses. Specific initiatives included industry-led pilot projects and regulatory facilitation to foster innovative solutions.
Moreover, BNM pursued strategies to position Malaysia as a leading international hub for Islamic finance, focusing on deepening the country’s Islamic financial markets and strengthening international linkages.
Growth in Islamic Banking and Takaful Sectors
Islamic banking and Takaful industries have continued to grow through 2023. The Islamic banking sector’s share of total financing in the financial system rose from 44.5% in 2022 to 45.6% in 2023. Similarly, the Takaful sector’s share of total net contributions increased from 23% in 2022 to 23.4% in 2023. Both sectors remained resilient and well-capitalized, enabling them to meet the financing needs of businesses, including SMEs and households, and provide comprehensive protection coverage.
Financial Sector Blueprint 2022-2026
Under the Financial Sector Blueprint 2022-2026, BNM has emphasized inclusivity, sustainability, and positive social impact. Key initiatives undertaken in 2023 included:
- Impact-driven Investment Accounts (IA): Launching a pilot project to facilitate innovative financial solutions.
- myWakaf 2.0: Mobilizing cash waqf for community and economic empowerment.
- CAKNA: Expanding and refining this non-debt funding facility to provide effective assistance to SME vendors.
Role of the Shariah Advisory Council (SAC)
BNM’s Shariah Advisory Council (SAC) continued to address Shariah-related issues, providing clarity on the permissibility of new Islamic financial transactions and arrangements. The SAC also played a crucial role in fostering continuous innovation in Islamic finance.
In 2023, BNM worked with key stakeholders to develop strategies for strengthening the Shariah talent ecosystem, aiming to expand the talent pool and ensure a robust succession pipeline for the SAC and Shariah committees.
International Leadership and Market Development
Malaysia remains a leading global market in Islamic finance. In 2023, BNM focused on deepening Malaysia’s Islamic financial markets, particularly in collateralized funding and derivatives markets. BNM also actively participated in international and regional forums, promoting the Malaysia International Islamic Financial Centre agenda. This included enhancing the competitiveness of Malaysia’s Islamic finance industry, strengthening financial linkages, and driving impactful financial innovation.
