28 May 2024
Paper makes recommendations to policy makers and industry players to build on the achievements over the last 60 years of Islamic finance, to help establish Islah (reforms and restoration) to address the needs of the economy and society through Islamic finance towards a more inclusive, sustainable and humane financial and economic system.
KUALA LUMPUR: MIFC Leadership Council (MLC) today unveiled its position paper titled MIFC Leadership Council Position Paper – Establishing Islah through Islamic Finance, which presents recommendations for the next stage of the development of Islamic finance in Malaysia. MLC chairman, Tan Sri Azman Mokhtar submitted the document to Prime Minister, Dato’ Seri Anwar Ibrahim at the launch of the Global Forum on Islamic Finance and Economics (GFIEF) here, today.
Presented in three parts, the Position Paper starts off by highlighting the growth in Islamic finance in Malaysia over the last 60 years or so with the formation of Lembaga Tabung Haji (Tabung Haji) in 1963 followed by the establishment of Bank Islam Malaysia Berhad in 1983. As of 2023, Islamic financing amounted to approximately RM1 trillion or 45.6% of the total financing, while Islamic capital markets constituted about 64.4% of the overall system, equivalent to approximately RM2.4 trillion.
The second section of the paper analyses the state of global finance and Islamic finance in relation to the growing pressures and needs of economies and societies amidst the complex poly-crises of our time. These crises encompass various issues such as the economy, development, inequality, sustainability, and humanitarian crises resulting from conflicts and displacement. The report emphasises the need for immediate change and highlights the opportunity for Malaysia’s Islamic finance to enhance its prominent position, both domestically and internationally.
Under the theme “Establishing Islah through Islamic Finance: Building on the shoulders of 60 years; co-creating the next wave of Islamic finance development towards a more inclusive and sustainable world,” the paper advocates an agenda for reform and restoration (Islah) of the economy and society, through Islamic finance and a call to action that outlines:
- 7 principles for change,
- 10 shifts or hijrah in areas and opportunities for change,
- 5 key thrusts for change,
- 10 MLC Key Focus Areas, and
- 18 initial MLC Impact Projects
Based on feedback and consultations gathered from over 100 stakeholder engagement sessions, including with regulators, industry players, scholars, and academia, both inside and outside of Malaysia, during the last 18 months, the Position Paper presents a thorough overview of the findings and recommendations for the future of the Islamic finance sector in Malaysia.
Formed by Bank Negara Malaysia and the Securities Commission Malaysia in October 2022, the MIFC Leadership Council (MLC) is dedicated to providing thought leadership, driving strategy formulation, and implementing initiatives aimed at enhancing Malaysia’s role as a global Islamic finance hub.
According to Tan Sri Azman Mokhtar, after six decades of achievements since the founding of Tabung Haji as Malaysia’s inaugural Islamic financial institution in 1963 and more than forty years since the formation of Bank Islam in 1983, the current environment presents a strategic opportunity for Islamic finance to assume a more influential position, thereby catalysing a fresh era of growth and advancement.
“In line with this vision, our Position Paper is centered around the theme of ‘Establishing Islah through Islamic Finance,’ underscoring our commitment to leverage the legacy of 60 years and collaboratively shape the future of Islamic finance and economics for a more inclusive and sustainable world,” he said.
The MLC Position Paper presents a comprehensive case for leveraging Islamic finance to drive meaningful change, addressing the urgent needs of economies and societies. These include economic issues related to inclusivity, the cost of living, and inequality, as well as societal concerns regarding sustainability, climate, health, and displacement. The paper sets forth 7 principles for change, focusing on inclusivity, sustainability, and ethical practices. It also introduces 10 key shifts under the “Hijrah to Islah” concept, which aims to catalyse positive societal transformation through Islamic finance. Additionally, the report delineates 5 key thrusts for co-creating the future of Islamic finance, along with identifying 10 MLC Key Focus Areas (MKFAs) and 18 MLC Impact Projects (MIPs) to steer industry transformation.
The 10 MKFAs are:
- Advancing the MIFC International Agenda
- Unlocking Philanthropic Capital
- Unlocking Equity Risk Capital
- Strengthening Waqf
- Strengthening Zakat
- Elevating knowledge, Capacity Building, and Institutional Building
- Strengthening Takaful
- Elevating Inclusivity and Entrepreneurship
- Elevating Sustainability
- Accelerating adoption of Digital Innovation & Technology.
One of the key MLC impact projects (MIPs) is aimed at enhancing international linkages through collaboration with foreign counterparts. This collaboration involves various areas, such as innovating Islamic finance products, facilitating and promoting cross-border financial activities, and implementing initiatives for capacity building and education.
During the launch of GFIEF, MLC formalised partnerships by exchanging memorandums of cooperation with four prominent entities: Komite Nasional Ekonomi dan Keuangan Syariah of Indonesia (KNEKS), Finance Office of the Presidency of the Republic of Türkiye (CBFO), Islamic Finance Council UK (UKIFC), and Hong Kong Trade Development Council (HKTDC).
Other significant MIPs include ‘Project Hassan’, a collaborative initiative led by Lembaga Zakat Negeri Kedah, INCEIF University, member banks of the Association of Islamic Banking and Financial Institutions (AIBIM), and MLC, aimed at enhancing zakat programmes to benefit asnaf (zakat recipients) in Kedah. Additionally, there is the ‘Scholars Review of Tayyib Concept’, a research partnership between MLC and the ISRA Research Management Centre, focused on investigating the practical applications of the Tayyib concept in shifting Islamic finance towards more Halal and Tayyib outcomes.
For more information, please contact Firdaus Suffian Abdul Latif at firdaus@mifc.com or Tel +6019 6647413
More details regarding 10 MKFAs are in media release below: