New Financial Sector Blueprint Eyes Bigger Role For Islamic Finance In Malaysia’s Economic Transformation -- BNM Governor
By M.Saraswathi & Karina Imran
KUALA LUMPUR, Oct 26 (Bernama) -- Bank Negara Malaysia (BNM) wants Islamic financial institutions to play a greater role in financing the country's next phase of economic transformation, an aspiration that would be reflected in the financial sector blueprint planned in 2027.
Speaking to Bernama, governor Datuk Seri Abdul Rasheed Ghaffour said the blueprint would focus on scaling the impact of Islamic finance, accelerating innovation, strengthening the financial ecosystem and expanding Malaysia's international linkages.
“Islamic finance must play a central role in supporting Malaysia’s economic transformation. This includes mobilising capital and delivering solutions for strategic growth areas such as the green transition, the halal economy and the expansion of high-value industries, including the electrical and electronics (E&E) ecosystem.
“Innovation must be purposeful. The true measure of Islamic finance is not the number of products introduced, but the meaningful impact those solutions deliver to businesses, communities and the broader economy,” Abdul Rasheed said.
Second, Islamic finance should strive to improve societal outcomes.
“The next phase of Islamic finance is not just about scale, but about impact. Its success should be reflected in stronger livelihoods, greater financial security, a more inclusive economy, more resilient businesses and a greener future,” he said.
He noted BNM believed Islamic finance could fulfil this role and demonstrate its value through purposeful action and real-world impact.
Among the other priorities are positioning Malaysia as an international gateway for Islamic finance, mainstreaming value-based finance, strengthening impact measurement, deepening Islamic financial markets and liquidity as well as encouraging the application of diverse Shariah contracts.
Malaysia Remains Open to Foreign Islamic Banks
On the possibility of allowing more foreign Islamic banks to operate in Malaysia, Abdul Rasheed said the country remains open to new entrants, provided they could contribute meaningful value to the economy.
“We never close our door. Any new entrant would therefore be considered based on their ability to introduce additional capabilities and support emerging economic needs,” he said.
On banking consolidation, the governor said BNM would continue to adopt a market-driven approach.
The central bank would facilitate consolidation where it could create stronger financial institutions capable of supporting businesses, individuals and the broader economy.
“Especially in terms of economic transformation, including the green economy, the halal industry and the semiconductor sector. So, we want financial institutions that can finance these growth opportunities,” he said.
Malaysia Retains Leading Position in Global Sukuk Market
Malaysia has sustained its leadership in the global Islamic capital market, with Islamic capital market activities accounting for about 64 per cent of the country's total capital market in 2025.
Malaysia also accounted for approximately 31.5 per cent of global outstanding sukuk, reinforcing its position as a major international Islamic finance centre.
“We remain a leader in this area. Our international sukuk issuance has reaffirmed investors' confidence,” he said, citing Malaysia's US$1.5 billion Global Sukuk, which garnered strong demand.
It was 4.7 times oversubscribed, with the peak order book exceeding US$9.5 billion.
“We got very good demand for this, with our lowest spread in history. The 5.75-year tranche was priced at 15 basis points above US Treasuries, while the 10-year tranche was priced at 25 basis points above the benchmark,” he said.
The governor said the spreads were comparable to those typically associated with AA-rated sovereign issuers, despite Malaysia carrying an A-category credit rating.
“The outcome demonstrates Malaysia's ability to leverage its domestic Islamic finance expertise internationally,” he stressed.
Technology to Expand Financial Inclusion
Touching on technology, Abdul Rasheed said innovation, particularly in artificial intelligence (AI) and digitalisation, must be pursued responsibly to broaden financial inclusion and improve access to financial services.
“We want innovation to be responsible and to deliver benefits to businesses, households, borrowers, the wider economy and the country as a whole.
“It must safeguard the interests of customers. More importantly, it must add real value to the economy,” he said.
He highlighted that one area with significant potential was the use of alternative data and behavioural assessments to evaluate borrowers who had traditionally been excluded from formal financing due to limited credit histories.
As an example, he pointed to AEON Bank and KAF Digital, Malaysia’s two digital Islamic banks, which were already applying such technologies to assess customers' repayment behaviour and extend financing to previously underserved segments.
“In the past, it was not possible to assess such customers because they lacked sufficient financial data or a formal credit history. This could allow financial institutions to serve individuals and businesses that were previously considered unbankable,” he said.
Beyond financial inclusion, technology can improve the efficiency of capital mobilisation and allocation, channel financing to productive businesses, reduce transaction costs and serve as a powerful catalyst for economic transformation, he added.
-- BERNAMA