BNM wants Islamic finance to channel more funding into Malaysia’s growth industries

Bank Negara Malaysia (BNM) aims to elevate the role of Islamic finance in funding Malaysia's growth industries in a new financial sector blueprint set to be unveiled in 2027. Governor Datuk Seri Abdul Rashid emphasized that Islamic finance must be integral to supporting the country's economic transformation, particularly in strategic areas such as the green transition, halal economy, and high-value-added industries like semiconductors.

He highlighted that true impact should be measured through real-world consequences rather than merely the number of financial products launched.

Abdul Rashid stressed that Islamic finance's future is not just about scale but influence, aiming to enhance social well-being by bolstering household financial security, supporting businesses, and fostering a more inclusive and resilient economy. BNM also plans to position Malaysia as an international hub for Islamic finance, mainstream value-based finance, strengthen impact assessments, deepen financial markets and liquidity, and encourage diverse Shariah contracts.

Foreign Islamic banks are welcome to contribute meaningfully to Malaysia's economy, according to Abdul Rashid, who noted that any new entrant would be assessed based on its ability to provide additional capabilities and address emerging economies' needs. The country's green economy, halal industry, and semiconductor sector are identified as key areas where financial institutions can facilitate growth and economic transformation.

Malaysia continues to lead globally in Islamic finance, accounting for around 64% of total capital market activity and approximately 31.5% of outstanding Islamic bonds worldwide. In 2025, Malaysia's issuance of US$1.5 billion in global sukuk attracted significant investor interest, being oversubscribed 4.7 times with orders reaching US$9.5 billion at one point. These record-low spreads indicate strong demand and Malaysia's capability to extend its domestic Islamic finance expertise to international markets.

Regarding technological advancements, Abdul Rashid called for responsible adoption of artificial intelligence (AI) and digitalization to enhance financial services accessibility, broaden financial inclusion, and bolster economic growth. He highlighted the potential of alternative data and behavioral assessments to serve customers with limited credit histories and emphasized that technology could optimize capital allocation, direct financing to productive businesses, and reduce transaction costs.

Digital Islamic banks like AEON Bank and KAF Digital Bank exemplify this trend, utilizing technology to extend financial services to previously underserved populations.