At the 19th Kuala Lumpur Islamic Finance Forum (KLIFF) 2024, held at the prestigious Royale Chulan Hotel, Dato’ Seri Abdul Rasheed Ghaffour, Governor of Bank Negara Malaysia, delivered an inspiring keynote address focused on the transformative role of Islamic finance in driving sustainable economic growth. Under this year’s theme, “Revitalising the Economy via Islamic Finance,” KLIFF once again provided a vital platform for leaders, policymakers, and stakeholders to explore actionable strategies for a resilient global economy grounded in Islamic financial principles.
In his opening remarks, Governor Abdul Rasheed reflected on the historical roots of Islamic finance, highlighting its ethical underpinnings and dedication to social welfare. He emphasized that Islamic finance has always stood as a symbol of integrity, promoting fair trade and equitable wealth distribution. These principles, he noted, remain relevant today as the global economy seeks sustainable alternatives to conventional financial models.
Governor Abdul Rasheed stated, “Islamic finance must build on its historical legacy by innovating and adapting to today’s needs while upholding our core values. We must continue to push the boundaries, just as our forefathers did, to create an economy that is inclusive, resilient, and just.”
Islamic Finance as a Tool for Economic Reform: Three Key Propositions
The Governor outlined three strategic pillars essential to elevating Islamic finance as a catalyst for economic revitalization, particularly in light of post-pandemic recovery challenges and increasing calls for ethical finance. His address detailed the potential of Islamic finance to contribute to global economic stability by adhering to three core propositions:
1. Embodying Maqasid Shariah in Sustainable Economic Reforms
Governor Abdul Rasheed emphasized that Islamic finance institutions must wholeheartedly embody Maqasid Shariah (the objectives of Islamic law) in their operations, placing the “prevention of harm and attainment of benefit” at the heart of their strategies. This commitment, he explained, goes beyond profit to encompass societal well-being and environmental responsibility.
He praised Malaysia’s pioneering role in implementing Value-Based Intermediation (VBI), which aligns financial services with social and environmental impact. He urged Islamic finance institutions to channel investments toward sectors that prioritize sustainability, such as renewable energy, healthcare, and affordable housing. “By fully embracing the principles of Maqasid Shariah, we can create a financial ecosystem that values fairness, transparency, and inclusivity,” he affirmed, reiterating the Quranic guidance for steadfastness in ethical conduct.
Malaysia’s recent initiatives, including the Value-Based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) and the Maqasid Shariah Scorecard, have set a strong foundation for sustainable finance. Governor Abdul Rasheed called upon all stakeholders to intensify the adoption of these frameworks, encouraging shareholders to actively drive the industry’s ethical transformation.
2. Advancing Innovation for Value-Based Solutions
The Governor highlighted the critical role of innovation in adapting to shifting economic dynamics and meeting diverse consumer needs. Islamic finance, he argued, must go beyond traditional practices by developing sophisticated, value-based solutions that address real-world challenges.
Governor Abdul Rasheed underscored the potential of blended finance, which combines philanthropic capital with commercial investment. He highlighted Malaysia’s iTEKAD program as a prime example, which has supported over 8,000 microentrepreneurs by merging zakat and waqf funds with traditional financing sources. Another notable initiative, the Greening Halal Businesses (GHB) program, aims to help Halal businesses adopt sustainable practices with support from the Malaysian government.
Technology, he noted, is pivotal to accelerating innovation in Islamic finance. Governor Abdul Rasheed highlighted the Financial Technology Regulatory Sandbox, an initiative designed to encourage fintech solutions within Islamic finance by offering regulatory flexibility. “Islamic finance must capitalize on digitalization, from leveraging blockchain to integrating AI, to create scalable, Shariah-compliant solutions that meet the needs of modern consumers,” he stated.
The Malaysian government has also introduced an RM100 million matching fund to promote risk-sharing products, with a focus on sectors such as climate transition and food security. Governor Abdul Rasheed urged industry leaders to seize this opportunity to advance innovative Islamic financial products, especially those addressing pressing global challenges like climate change.
3. Strengthening Global Integration for Shared Prosperity
Islamic finance, Governor Abdul Rasheed stressed, is inherently inclusive and capable of fostering cross-border cooperation. The global Islamic finance market has rapidly expanded, with assets exceeding USD 4.5 trillion in 2022, and Malaysia is well-positioned as a leader in this space.
He called for increased collaboration through strategic avenues, such as partnerships with international Shariah authorities to promote mutual respect and knowledge sharing. Malaysia’s MIFC Leadership Council, he explained, is actively working on establishing cross-border business linkages, supporting the expansion of Islamic finance in emerging markets like Central Asia and North Asia.
He also highlighted the importance of developing a skilled talent pool within Islamic finance, urging educational institutions such as INCEIF University and ISRA to foster greater talent mobility and enhance Malaysia’s connectivity with global markets. “By future-proofing our talent and fostering global collaboration, we can ensure Islamic finance remains competitive and continues to drive growth across borders,” he noted.
Malaysia’s Continued Leadership in Islamic Finance
Malaysia’s robust framework for Islamic finance has cemented its global leadership position. Governor Abdul Rasheed noted that Islamic finance constitutes nearly half of Malaysia’s total banking sector, with Takaful representing 25% of the insurance market. Additionally, Malaysia commands 42% of the global Sukuk market, a testament to its effective regulatory and market infrastructure.
He lauded Malaysia’s commitment to sustainability, reflected in recent initiatives like the Maqasid Shariah Scorecard, which supports Malaysia’s reputation as a global hub for ethical finance. Looking forward, Malaysia’s 2025 ASEAN Chairmanship offers a unique opportunity to align Islamic finance with the sustainability goals of ASEAN nations, driving further growth and regional integration.
Islamic Finance and the Path to a Resilient, Ethical Economy
Governor Abdul Rasheed highlighted that Islamic finance, rooted in principles of fairness and responsibility, has a unique ability to address today’s economic challenges. He urged stakeholders to leverage KLIFF’s discussions to promote Islamic finance as a driver of equitable, sustainable growth. “The initiatives launched here will shape the future of our industry and serve as building blocks for meaningful, long-term change,” he remarked as he formally inaugurated KLIFF 2024.
KLIFF 2024 underscored the transformative potential of Islamic finance to reshape the global economic landscape. Governor Abdul Rasheed Ghaffour’s insights emphasized that Islamic finance’s principles of equity, social responsibility, and sustainability can provide the foundation for a more resilient and inclusive economy.
As Malaysia continues to set the benchmark in Islamic finance, KLIFF 2024 serves as a beacon for countries worldwide, illustrating how Islamic financial principles can guide economic recovery and progress. By embracing sustainable innovation, fostering cross-border cooperation, and staying true to Shariah principles, Islamic finance is poised to create an economically just and sustainable future.
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