The market share of Islamic banks in Malaysia has quadrupled from 7.1 per cent in 2010 to 28 per cent in 2016, Bank Negara Malaysia said in a strategic paper published recently.
However, the central bank said the decline in its annual growth rate from a double-digit in 2011 (24.2 per cent) to 8.2 per cent in 2016 signalled that the Islamic financial industry needs to further explore new opportunities for sustained growth.
“Current initiatives primarily focus on ensuring that the product structures, features and operational aspects of financial transactions (including services) comply with Syariah requirements as specified in the regulatory framework.
“It is essential that a greater emphasis should be given to consider the wider impact of the financial activities.
“More business opportunities could be created if the current paradigm could be shifted to extend beyond compliance, towards delivering value propositions not only to all financial consumers, but to the wider stakeholders within the society and the economy at large,” the paper stated.
The Strategy Paper sets out the underpinning thrusts of value-based intermediation (VBI) and proposed implementation approach and strategies in advancing VBI as the next strategic direction for Islamic banking industry.
It added: “The industry’s disclosure has been largely driven by regulation. Existing information and data mainly focus on financial performance (i.e. profitability and asset quality) of industry players.
“Enhanced transparency should include industry players’ role and impact to wider stakeholders especially in the non-financial aspects such as facilitation of entrepreneurship, community well-being, sustainable environment and economic growth.
“The comprehensiveness of the transparency will influence financial industry’s key stakeholders’ perception and decision-making,” it said.
The VBI function aims to deliver the intended outcomes of Syariah through practices, conduct and offerings that generate positive and sustainable impact to the economy, community and environment, without compromising the financial returns to shareholders. The central bank also invited written comments on the proposed strategies, including suggestions for particular issues or areas to be clarified or elaborated further and any alternative proposals that BNM should consider.—Agencies