KUALA LUMPUR: Bank Negara Malaysia (BNM) today issued two guidance documents to facilitate the practical adoption of the value-based intermediation (VBI) initiative, in conjunction with the Global Islamic Finance Forum 2018 (GIFF 2018).
BNM, in collaboration with the Islamic finance industry in July last year introduced the VBI concept paper, which is aimed at strengthening the role and impact of Islamic banking institutions towards a sustainable financial ecosystem.
The initiative also aims to position Islamic finance as a leading agent of change by incorporating holistic business practices, conduct and offerings that have positive and sustainable impact on the economy, community and environment.
BNM governor Datuk Nor Shamsiah Mohd Yunus said the two guidance documents, namely the VBI Impact Assessment Framework and the VBI Scorecard, are open for public consultation.
She said the VBI assessment framework will provide guidance on the assessment of financing and investment applications taking into consideration economic, social and environmental impacts. The scorecard will support the implementation of performance measurement frameworks for Islamic financial institutions that drive positive value and impact on society as well as the environment.
“I look forward to receiving constructive feedback from the industry and interested parties, and to further strengthen these frameworks to drive a renewed focus on sustainable financial solutions,” she added.
Shamsiah said the central bank expects that VBI adoption will have significant impact on business models of Islamic financial institutions, including the drivers of profitability and risks.
Therefore, the industry needs to make a choice to either continue to ignore social and environmental issues or embrace a philosophy of finance beyond profits.
“For example, in the agriculture sector, resources can be channelled towards building flood defences, and developing local structures and facilities that are more resilient to harsh weather conditions. Takaful solutions also have an important role in strengthening resilience against climate events,” she noted.
According to Association of Islamic Banking and Financial Institutions Malaysia president Datuk Adissadikin Ali, currently, nine out of 27 Islamic banking institutions in Malaysia have adopted VBI practices. They include Bank Islam, Bank Muamalat, CIMB Islamic, Agrobank, HSBC Amanah, Maybank Islamic, AmBank Islamic, Alliance Islamic and Standard Chartered Saadiq.
“The adoption of VBI is on voluntary basis, but we’re all agreed to adopt it,” Adissadikin said.
The two-day GIFF 2018, hosted by AIBIM, focuses on ways to strengthen the roles and impact of Islamic banking institutions towards a sustainable financial ecosystem and promotes the application of VBI practices.
Source: The Sun Daily