Adnan Zaylani Mohamad Zahid: Welcoming remarks - Islamic
Development Bank-Malaysia's Islamic Financial Markets
Subcommittee Roundtable Discussion 2024
Welcoming remarks by Mr Adnan Zaylani Mohamad Zahid, Assistant Governor of the
Central Bank of Malaysia (Bank Negara Malaysia), at the Islamic Development Bank
(IsDB) and Malaysia's Islamic Financial Markets Subcommittee (IFMC) Roundtable
Discussion 2024, Kuala Lumpur, 27 May 2024.
* * *
Assalamualaikum and a good day to all. It is my great pleasure to be part of this
Roundtable Discussion between the Islamic Development Bank (IsDB) and Malaysia's
Islamic Financial Markets Subcommittee (IFMC). This gathering offers an excellent
platform to continue our ongoing conversations in harnessing our synergy for a bigger
impact on the ummah .
Five decades of partnership, with Islamic finance as a propellent for
bigger impact
Ladies and gentlemen,
Our partnership has come a long way. Malaysia was one of the founding members of
the IsDB when it was founded in 1975. The establishment of the IsDB Regional Office
in Kuala Lumpur in 1994, subsequently transformed into a Centre of Excellence in
2021, has served as a conduit for fostering exchanges in expertise, technology, and
investment. The invaluable five decades of partnership between us have yielded mutual
benefits, paving the way for continued collaboration.
Islamic finance has been the catalyst for the partnership against the backdrop of rapid
global Islamic finance growth. The industry has grown more than twofold compared to a
decade ago, with projected global Islamic finance assets estimated to reach USD6.7
1
trillion in 2027 . At the heart of this development is the Islamic financial market, which
plays an integral role in intermediate funds, effectively channelling liquidity in between
industry surpluses and deficits, intermediating across financial institutions, different
markets and borders. Part of the strong development that is most visible is the threefold
increase in outstanding global sukuk over the last ten years, a testament to how Islamic
financial markets have been able to intermediate long-term financing for sovereign and
corporate sectors.
Islamic finance - A shared success story
Islamic finance has been our shared success story. Malaysia is home to the world's
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largest sukuk market, accounting for 40% of global sukuk outstanding . Islamic money
market instruments maintain a significant share and have expanded steadily and
correspondingly to support the growth of the Islamic banking sector, which now
3
constitutes 46% of total financing . We are also grateful that our Islamic Capital Market
(ICM) experienced substantial growth and remains a key component of the Malaysian
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capital market, contributing 63% to its total size .
IsDB, on the other hand, stands as a beacon of progress, embodying a commitment to
fostering economic development and social progress in its 57 member countries and
Muslims worldwide. A prominent issuer of high-quality sukuk with a broad investor
base, IsDB deploys the proceeds of its sukuk to fund programmes that help shape the
future of Islamic banking, benefiting a diverse portfolio of development projects and
enriching markets. In Malaysia, the IsDB has made significant strides, leaving a positive
and lasting footprint. In fact, Bank Negara Malaysia (BNM) has long been an investor in
the IsDB public sukuk issuances and remains a major investor today.
One particular success story is also the International Islamic Liquidity Management
Corporation (IILM), in which both BNM and IsDB played key foundational roles during
its establishment alongside several other central banks. IILM facilitates cross-border
liquidity management among global financial institutions through the issuance of
highquality, short-term USD sukuk. Today, IILM has successfully established a track record
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and has issued a cumulative over USD100 billion short-term tradable USD sukuk . It is
now looking at its next development phase, scaling up to meet the ever-growing
demand for short-term paper in the Islamic financial market.
Three critical impetuses to further unlock Malaysia-IsDB potential
synergy in Islamic finance
In light of the success stories that we share, Malaysia looks forward to further bolstering
our partnership potential in Islamic finance. I would like to propose three critical
impetuses for this:
First, strategic alignment is driven by aims to advance the ummah . Identifying
common priorities for the IsDB and Malaysia will enable us to channel resources and
focus efforts more effectively. The signing of the Murabahah Master Agreements today
marks another milestone in achieving this, building upon a Memorandum of
Understanding in 2021 between the Government of Malaysia and IsDB to cultivate
cooperation on Islamic finance and related domains. It is instrumental in facilitating a
deeper understanding of each other's investment preferences and risk appetites, paving
the way for mutually beneficial investment linkages.
Another shared priority is our respective focus on green finance and sustainability
agenda. The IsDB's Strategic Realignment 2023-2025, specifically on "Driving Green
Economic Growth", aligns well with our Value-based Intermediation Framework and is
empowered further by our national economic masterplans, the National Energy
Transition Roadmap (NETR). We would also like to welcome greater engagement from
multilateral development banks such as the IsDB to participate in providing financing
and critical expertise in the area of sustainable development in Malaysia, particularly in
green finance and sustainability. On that note, I am pleased to share that BNM is now
providing regulatory flexibility for multilateral development banks to issue
ringgitdenominated sukuk and to provide ringgit financing to resident entities in Malaysia
without the need for prior approval from BNM. These foreign exchange policy
flexibilities, as a package, are expected to reduce the concern of foreign exchange
mismatch for both the lender and the borrower.
Second, innovation and conducive market access at the core of partnership.
Through innovative pilot projects such as a blended financing programme tailored for
halal market players, our partnership could further capitalise on emerging global
opportunities and evolving market needs. Potential collaborations could open the doors
for competitive cross-border halal businesses in the OIC market. At the same time, it
provides opportunities for cross-border trade facilitation for Islamic banks across
jurisdictions, supported by diverse Shariah contracts available to cater for niche funding
needs. The opportunities are bountiful.
Of equal importance, conducive market access should also be pursued to enable better
investment flows and economic integration. This could be made possible by proactively
addressing cross-border barriers and harmonisation of practices, aiming to drive
sustainable development in Malaysia and the broader Islamic world.
Third, capacity building to future-proof talents in Islamic finance. Investment in
human capital development is a pivotal strategy for fostering long-term growth in Islamic
finance. In Malaysia, we have a robust capacity-building ecosystem such as
professional qualification and certification programmes - to name a few; we have the
Chartered Professional in Islamic Finance (CPIF), Certified Shariah Advisor (CSA) and
Certified Shariah Practitioner (CSP). Even for financial markets, part of the modules for
the Financial Market Certification, essentially the license to become a money market
dealer, includes an Islamic money market module. While some of these cater to the
Malaysian financial system, many are universally relevant. Malaysia is hopeful to play a
supportive role in the continued growth of talent in the global Islamic financial sector.
Today's roundtable is highly timely. For us, the Islamic Financial Market Sub-Committee
(IFMC), set up in 2022, is to address market challenges and drive solutions to deepen
the domestic Islamic financial market. One of the IFMC's remarkable strides is in the
area of Islamic derivatives, which has led to a groundbreaking Shariah Advisory Council
ruling on the permissibility of anticipatory hedging. Building from this progress, the
IFMC has also been entrusted to explore strategies to enhance foreign investors'
participation in the domestic market and activate the market for sustainability-linked
instruments. I hope that today's session will continue to build on that and generate more
ideas that could also span the international and cross-border markets.
Indeed, allow me to offer a thought - drawing inspiration from Malaysia's experience,
could the global Islamic finance realm benefit from the formation of a "Global" Islamic
Financial Market Committee? Akin to the coalition of central banks and private sectors
in the Global Foreign Exchange Committee (GFXC) established in 2017 for the global
FX market, such a forum would magnify multi-jurisdictional efforts with a strategic vision
to propel the global Islamic financial market, expand all our intermediation frontiers, and
nurture resilient cross-border liquidity management.
Conclusion
In harnessing our partnership, let us be guided by the wisdom of the Quran verse:
"Cooperate with one another in goodness and righteousness, and do not cooperate in
sin and transgression" [Al-Maidah: verse 2].
May this dialogue provide momentum for continued collaboration between us. Together,
we can achieve even greater heights in Islamic finance. On this note, let the Islamic
Development Bank and Islamic Financial Markets Subcommittee Roundtable
Discussion begin - I wish you all a productive discourse ahead.
Thank you.
1
Source: ICD-LSEG Islamic Finance Development Report 2023
2
IIFM Sukuk Report 2023
3
Bank Negara Malaysia
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Securities Commission; Statistics for Islamic Capital Market in Malaysia
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Source: IILM website