Islamic Social Exchange Shaping the Future of ICM in Malaysia

KUALA LUMPUR – Datuk Seri Awang Adek Hussin, Chairman of Securities Commission Malaysia, underscored the critical role of introducing an Islamic social exchange in steering the nation’s Islamic capital market (ICM). This initiative, he believes, will amplify environmental, social, and governance (ESG) efforts, primarily to bolster support for the underprivileged.

During his address at the 21st Islamic Financial Stability Forum 2023, Awang Adek emphasized the imperative for Malaysia’s ICM to synchronize more holistically with ESG mandates. He cited the Sustainable Responsible Investment (SRI) framework, encompassing both SRI sukuk and SRI-linked sukuk, as pivotal steps in this alignment. Notably, the SRI-linked sukuk offers transformative financing opportunities for corporations transitioning to eco-friendly operations.

He reminded the audience that Malaysia’s ICM undertakings have consistently upheld principles of ethical and sustainable actions, mirroring the stringent standards set by Shariah law. He proposed a new paradigm – “Shariah-plus” – which seeks to resonate more profoundly with the core tenets of Maqasid al-Shariah.

Furthermore, Awang Adek illuminated another prospective avenue: leveraging social finance within the waqf-featured fund framework. This innovative model empowers investors to channel dividends from unit trusts and bulk funds toward charitable causes.

Sharing recent financial insights, he revealed that as of December 31, the ICM constituted a staggering 64.5% of Malaysia’s entire capital market, amassing approximately US$500 billion. Within this colossal figure, Shariah-compliant securities claimed a 46% share (US$232 billion), while sukuk holdings stood at 54% (US$268 billion).

Finally, on an international note, Awang Adek lauded the collaborative endeavors between the Securities Commission and the Islamic Financial Services Board (IFSB). This partnership has been instrumental in crafting 23 standards, four technical notes, and six guidance advisories that aid global regulatory and supervisory bodies in Islamic finance. He concluded by announcing the Securities Commission’s intent to promulgate guidelines on the principle-based Maqasid al-Shariah compliance by the year’s end, addressing the surging investor demand for enhanced conformity.