and monitor transactions for commercial viability and risks. the growing momentum in global trend towards sustainability agenda does not only sharpen the focus on formulating necessary solutions to key global challenges such as poverty, food security and inequalities. most importantly, it creates a sense of urgency for financial institutions to embrace long - term value creation mindset. increasingly, stakeholders are setting higher expectations on financial institutions to manage the threats of climate and environmental - related risks that are real, with irreversible consequences. failure to respond appropriately and in a timely manner may have adverse implications on the economy and direct financial consequences on financial institutions. a case in point is the reputational risk a financial institution that provides financing to companies involved in environmental destruction activities could face, which may eventually affect the institution ’ s financial sustainability. malaysia ’ s experience and approach a question in mind is therefore whether islamic finance has fully optimised on these value propositions. allow me to share this in the context of the malaysian islamic financial industry. 1 / 3 bis central bankers'speeches after three decades of development, the islamic finance industry has progressed to become an integral component of the malaysian financial system5. most notably, islamic finance has played a catalytic role in financial inclusion – enabling access to formal financial services for the different segments of the society. in charting its strategic direction, in 2017, a few islamic financial institutions began to explore value - based intermediation or vbi as a new operational model. the vbi encapsulates the vision to focus on being more impact - driven, reinforcing the overarching intent of shariah to promote good and prevent harm. islamic finance, moving forward, strives to be relevant to all as a financial intermediation that creates positive and sustainable values for broader stakeholders – consistent with the long - term value creation for shareholders and aligned with the national targets of sustainable development goals ( sdgs ). to date, 12 islamic banking institutions have committed to integrate environmental and social considerations in their offerings, practices and cultures. in facilitating the industry in this journey, bank negara malaysia collaborates with the industry to create an enabling environment for smooth and orderly transition. these include the issuance of several guidance documents such as vbi implementation guide, vbi scorecard and value - based impact assessment framework ( vbiaf ). more recently, the bank and the vbi community of practitioners ( cop ) have embarked on efforts to develop sector - specific guide on value - based impact assessment

products are suitably carving out a market. there is indeed a market need for these products and that market is expanding quite fast. be they muslim or not, individuals and corporate bodies in western markets are increasingly purchasing, for instance, shariacompliant mortgages thus supplying funds to islamic financial institutions to create more and more sharia - compliant mortgages. the sharia - compliant mortgage is a product that is not subject to the vagaries of interest rate volatility and as such this instrument is found to be the most appealing to bank customers. having said that let me give a very broad brush - stroke of recent trends in islamic banking. in a few countries the entire banking system has been converted into islamic banking ; in some others the banking system is dominated by conventional banking institutions operating alongside islamic banks. over 250 islamic financial institutions are presently operating worldwide. several international banks like the citigroup, hsbc and lloyds tsb are offering islamic financial products and services either through ‘ islamic banking desks ’ within their conventional banking businesses or the establishment of separate banks or subsidiaries that specialise in financial products. indeed, these banks have successfully added targeted services to their broader platform. the sources of funds of islamic financial institutions as well as the types offinancing proposed by islamic financial institutions have evolved over time. the main sources of funds are classified broadly into current accounts, savings accounts and investment accounts – such as in the form of amanah and qard - hasan deposit 3 understood as conventional deposit for safekeeping the face value of which has to be guaranteed by the financial institutions. mudarabah, refers to contracts in which a financial institution purchases goods upon the request from a client and the profit or loss is shared between them at an agreed upon ratio. this is classified as a loan. participation term certificates and profit and loss sharing certificates : these certificates resemble shares in a company and are generally classified as deposits. the principal types of financing are generally categorised into investment financing, trade financing, lending and services – in the form of qard - hasan loans, murabaha, musharaka, ijara, ijara wa iktina and salaf. these are but a few of the financial products. the modes of financing in islamic banking emphasise principally profit - andloss sharing, although there are also some non - profit and loss sharing modes of financing. theoretically, islamic banks are relatively more concerned about the feasibility and profitability of a