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Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus (centre) visits booths at Global Islamic Finance Forum 2018. Pix by HAFIZ SOHAIMI
Bank Negara Malaysia Governor Datuk Nor Shamsiah Mohd Yunus (centre) visits booths at Global Islamic Finance Forum 2018. Pix by HAFIZ SOHAIMI

KUALA LUMPUR: Bank Negara Malaysia has issued guidance documents to encourage the nation’s Islamic financial institutions to adopt a value-based system to generate positive social impact, while helping to propel the industry into a new growth pathway.

The documents provided guidance to banks on implementing the value-based intermediation (VBI) system, creating a financing and investment framework, and a VBI scorecard.

Governor Datuk Nor Shamsiah Mohd Yunus said with the support of the central bank, the industry in Malaysia had been taking concrete steps to drive strategies to increase the positive impact of finance on society.

“The commitment to adopt VBI is a significant step by the industry to clearly identify Islamic finance with sustainable practices, as it should,” Nor Shamsiah said at the Global Islamic Finance Forum 2018 (GIFF2018) attended by over 1,000 delegates.

“From time to time, we expect the use of the VBI to have a major impact on the business model of Islamic financial institutions, including drivers of profit and risk," she added.

She said Bank Negara would continue to work on developing the VBI system for Islamic finance in Malaysia and it will be the main focus of the central bank.

A guidance document, VBI Impact Assessment Framework (VBIAF) consists of providing guidance on valuation of financing and investment applications that take into account of the economic, social and environmental impacts.

The VBI scorecard on the other hand supports the implementation of performance measurement frameworks for Islamic financial institutions that drive positive values and impact on society and the environment.

Shamsiah said the growth of Islamic finance in Malaysia has been a remarkable success story, with the market share of Islamic banking assets in Malaysia having reached the 30 per cent mark.

This has, however, since slowed, signalling the need for a fresh direction, she added.

“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,” Shamsiah said.

With the theme ‘Beyond Profit’, GIFF2018 brings together a panel of experts in Islamic finance and sustainability to lead the conversation in encouraging the banking industry to progress from Shariah-compliant banking towards a more holistic practice of Shariah-based financing that generates a positive impact on the economy, community and environment.

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