KUALA LUMPUR (April 28): The Labuan International Business and Financial Centre (Labuan IBFC) is shifting its focus towards Islamic finance to set itself apart from larger international centres, said Labuan Financial Services Authority (Labuan FSA) director general Affendi Rashdi.

“We need to compete smartly. We cannot compete head-on with global financial centres like Singapore and Hong Kong,” Affendi told The Edge after the launch of the regulator’s 2025 market report. “Instead, we focus on our niche — Islamic finance, digital finance, and areas where we can be a pioneer.”

Labuan IBFC, Malaysia’s mid-shore financial hub, has been positioning itself in specialised areas such as tokenisation and climate-focused Islamic financial instruments, according to Affendi. These efforts are aimed at capturing emerging opportunities while differentiating itself from larger, more established financial centres, he added.

In 2025 alone, Labuan IBFC saw its Islamic banking assets grow 35.2% to US$2.2 billion in 2025, driven mainly by the expansion of window operations. Affendi said maintaining strong regulatory standards will be key to sustaining growth and investor confidence.

“We will continue strengthening supervision and regulation to ensure we remain credible,” he said, adding that efforts are also underway to enhance industry capabilities, including supporting trust companies and other intermediaries.

The move also comes at a time when Malaysia has been pushing ahead to strengthen its leadership in Islamic finance. Regulators such as the Securities Commission Malaysia are expanding the Islamic capital market, with a focus on sustainability, innovation and Maqasid al-Shariah, which emphasises social and economic well-being.

At the financial hub, Affendi said the role will be to complement — rather than compete with — other domestic regulators. The Labuan FSA is working closely with Bank Negara Malaysia and the Securities Commission to ensure policy alignment and avoid regulatory overlap.

Further details on how the hubs will leverage on that are expected to be released in its upcoming roadmap that will be released next year. 

Labuan IBFC is expected to achieve about 96% of its Strategic Roadmap 2022–2026 targets by year-end, Affendi said.

Based on the island of Labuan, it serves as an international financial hub for cross-border business, mainly catering to global investors, multinational companies and high-net-worth clients. The centre is regulated by the Labuan FSA, which oversees licensing, supervision and development.

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