Rupa Damodaran

KUALA LUMPUR: Bank Negara Malaysia is in the midst of developing a scorecard with Islamic banking players that will measure the adoption of value-based intermediation (VBI) initiative.

Deputy governor Abdul Rasheed Abdul Ghaffour said the VBI marks the next step to realise the full potential of Islamic finance.

The VBI initiative will be adopted in phases by the Islamic banking industry players based on each of the institution's timeline and capacity.

To date, nine Islamic banking institutions - Bank Islam, Bank Muamalat, CIMB Islamic, Agrobank, HSBC Amanah, Maybank Islamic, AmBank Islamic, Alliance Islamic and Standard Chartered Saadiq formed the VBI Community of Practictioners (COP).

"The move towards embracing VBI is another hallmark in Malaysia's journey to manifest the larger aspiration of Islamic finance," Abdul Rasheed said.

He was speaking at a VBI Dialogue attended by more than 300 participants including those from banks, academicians and regulatory agencies.

VBI will be a game changer giving equal weight to both economic value creation and upholding ethical values.

While VBI shares similarities with ethical finance, ESG ( environmental, social and corporate governance) and SRI (Sustainable, responsible, impact investing, the distinguishing factor is the Syariah aspect.

"Its adoption will further strengthen self discipline within Islamic banks," he said, adding that greater accountability and integrity would lead to better offering and treatment toward customers and employees.

Business propositions from new sectors such as small and medium-sized enterprises (SMEs) would benefit from financial applications based on potential value creation and not just their credit scores.

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