KUALA LUMPUR (Oct 5): Bank Negara Malaysia (BNM) Governor Tan Sri Nor Shamsiah Mohd Yunus has on Wednesday (Oct 5) urged the Islamic finance industry to strive for excellence "to address contemporary challenges".

In her speech during the Global Islamic Finance Forum 2022, she said the Islamic finance industry should strive for excellence exemplified through "ihsan" or “continuously striving for attainment of excellence”.

She stated three key imperatives on building ihsan in the industry: industry alignment to values, action-oriented leadership, and strengthening connectivity.

“Changes to the way Islamic finance operates cannot happen overnight. But what the industry does today will be crucial in bringing to life the fundamental values of Islamic finance,” she said.

Amid the global challenges, Islamic finance continues to progress, and according to the Association of Islamic Banking and Financing Institutions Malaysia's (AIBIM) value-based intermediation (VBI) report, between 2020 and 2021, Islamic banks intermediated up to RM146.6 billion worth in financing, investments, and deposits in VBI-related or VBI-aligned initiatives.

Despite the success, Nor Shamsiah said the industry still faces challenges in changing how banking operates to deliver value-based finance.

Additionally, only 4.2% of investment accounts intermediated by Islamic banks are applicable for financial transformation.

“We have also yet to make the most out of the full range of Shariah contracts in finance application today,” she said, adding that “benevolent contracts, risk sharing contracts, and other asset-based contracts have yet to be fully utilised to offer a broader spectrum of funding, investment and protection solutions”.

At the same event, Nor Shamsiah announced the formation of a Malaysia International Islamic Financial Centre (MIFC) leadership council — a joint initiative between BNM and Securities Commission Malaysia to provide leadership and strategy formulation on Malaysia's Islamic finance.