KUALA LUMPUR (May 27): Bank Negara Malaysia (BNM) is now providing regulatory flexibility for multilateral development banks to issue ringgit-denominated sukuk and provide ringgit financing to resident entities in Malaysia without prior approval from the central bank.
“These foreign exchange policy flexibilities, as a package, are expected to reduce the concern of foreign exchange mismatch for both the lender and the borrower,” BNM deputy governor Adnan Zaylani Mohamad Zahid said in his welcoming remarks at the roundtable discussion between Islamic Development Bank (IsDB) and Malaysia’s Islamic Financial Markets Subcommittee (IFMC).
In 2007, flexibility under BNM’s foreign exchange administration rules was accorded to multilateral development banks, multilateral financial institutions, sovereigns, quasi-sovereigns and local or foreign multinational corporations to issue foreign currency-denominated sukuk in Malaysia.
Given the shared priority on green finance and sustainability agenda, Adnan Zaylani said BNM also welcomes greater engagement from multilateral development banks such as IsDB to participate in providing financing and critical expertise in the area of sustainable development in Malaysia, particularly in green finance and sustainability.
Additionally, Adnan Zaylani said identifying common priorities for IsDB and Malaysia will enable banks to channel resources and focus efforts more effectively.
“The signing of the Murabahah Master Agreements today marks another milestone in achieving this, building upon a Memorandum of Understanding in 2021 between the government of Malaysia and IsDB to cultivate cooperation on Islamic finance and related domains. It is instrumental in facilitating a deeper understanding of each other's investment preferences and risk appetites, paving the way for mutually beneficial investment linkages.”
The potential collaborations could open the doors for competitive cross border halal business in the Organisation of Islamic Cooperation (OIC), he stated.
“At the same time, it provides opportunities for cross-border trade facilitation for Islamic banks across jurisdictions, supported by diverse Shariah contracts available to cater for niche funding needs,” he added.
Adnan Zaylani said another priority is the capacity building to future-proof talents in Islamic finance, especially in human capital development, to foster long-term growth in Islamic finance.
He said Malaysia is hopeful of playing a supportive role in the continued growth of talent in the global Islamic financial sector, as Malaysia has a robust capacity-building ecosystem, such as professional qualification and certification programmes.