• Encik Mohamad Faisal Abdul Malik, Vice President, Malaysian Institute of Accountants
• Graduates
• Ladies and Gentlemen

1. On behalf of the Islamic Finance Committee of the Malaysian Institute of Accountants, I am delighted to welcome everyone to the MIA Islamic Finance Pupillage Programme Certification 2021/2022 Ceremony.
2. Congratulations to all the graduates of this Islamic Finance Pupillage programme on attaining this certification. This certification is a milestone on your journey of professional development. I encourage you to upskill further to be able to navigate and ride on the anticipated waves of future growth in the Islamic finance industry.
3. Alhamdulillah, in spite of the global economic and geopolitical headwinds, Islamic finance continued to perform well as economies reopened and transited to the COVID-19 endemic phase. According to Moody’s, the global rating agency, the economic recovery in key Islamic finance markets – which includes Malaysia – would boost credit growth and demand for Shariah-compliant products, and Islamic banks’ asset growth is expected to continue to outperform their conventional peers. Islamic finance rebounded strongly in the first half of 2021 with Islamic finance assets valued at US$3.6 trillion in 2021 and expected to reach US$4.9 trillion in 2025.
4. Malaysia demonstrated resilient strength in the recovering landscape. The Global Islamic Economy Indicator for 2021 ranked Malaysia as the global leader in Islamic finance, where Malaysia ranked first among 81 countries for the ninth consecutive year.
5. Even as the Islamic finance sector continues to record excellent growth, Malaysia is ceaselessly looking to diversify and stimulate further growth in the COVID-19 endemic economy through key developments in the following areas which are central to sustainability, namely social financing, fintech and sustainable finance.

 

<Social financing>

6. In alignment with the national philosophy of Malaysia Madani as propounded by the unity Government, it is critical that Malaysia uphold the values and principles of Islamic finance towards achieving common prosperity, sustainability, and inclusivity.
7. Islamic social financing is therefore a critical mechanism to promote social trust, cooperation, and solidarity, which supports the social component of the environmental, social and governance (ESG) agenda.
8. In Malaysia, through value-based intermediation (VBI)-aligned initiatives and guided by the Financial Sector Blueprint 2022-2026, the Islamic finance sector contributed significantly to the country’s socio-economic recovery during the COVID-19 pandemic by distributing social finance to the vulnerable segment, particularly the B40s and the micro, small and medium enterprises (MSMEs). A total of RM146.6 billion in financing, investments and deposits were intermediated by Islamic banks in VBI-related or VBI-aligned initiatives between 2020 and 2021.
9. However, value-based finance is still in its early stages. Since the launch of the VBI initiative in 2017, the majority of the VBI Community of Practitioners members remain at the ‘Emerging’ phase of implementation. There is room to further diversify value-based capital, which include funding of new ventures and other VBI-aligned outcomes, with only 4.2 per cent of investment accounts intermediated by Islamic banks being suitable to finance transformation, such as in supplying growth capital to industries of the future or new business models.
10. The industry also has potential to optimise benevolent contracts, risk-sharing contracts and other asset-based contracts to offer a broader spectrum of funding, investment and protection solutions that support social and economic transformation. In order to take VBI to the next level, there is a need for a whole-of-ecosystem alignment to Islamic finance values and commitment from all players in the ecosystem, including everyone today in this room.

 

<Fintech>

11. The Islamic financial technology (fintech) industry in Malaysia, like VBI, offers vast potential that we can harness. Fintech will continue to grow in the coming years through the development of policies, technology, and talents to support the ecosystem. Currently, the Islamic fintech segment is more mature here compared to other countries, with facilitation from Bank Negara Malaysia (BNM) and Government agencies such as the Malaysia Digital Economy Corporation (MDEC), availability of resources, and Malaysia’s global perception as an export base for Islamic financial services and talent.
12. Prospects for Islamic fintech in Malaysia are bright as 33 per cent of the world’s fintech companies are headquartered here. The issuance of digital banking licenses, including syariah-compliant licenses, will also accelerate the deployment of new technologies to serve the unbanked and underserved communities, and pressure Islamic fintech to up its game.
13. Islamic financial institutions are encouraged to step up the adoption of emerging technologies such as artificial intelligence and big data to tap into new opportunities in under-served markets. Yet, while the deployment of financial technology in Islamic financial services creates enormous opportunities, it comes with several challenges. These include the need to strengthen regulatory oversight, cybersecurity, Shariah governance, and talent availability, which need to be addressed urgently.

 

<Sustainable Finance to support sustainable development goals>

14. Another emerging area where Islamic finance can make a significant impact is climate and sustainable finance. Islamic finance can be a powerful tool for climate action. Addressing the climate emergency will require all the funding possible from as many diverse sources as possible.
15. Malaysia sees Islamic finance as having the potential to play a significant part in supporting the UN Sustainable Development Goal (SDG) commitments. A large financing gap needs to be filled to realise the SDGs in developing nations, which is estimated to be between $2.5 trillion to $3 trillion annually. The Organisation of Islamic Corporation (OIC) countries alone need about $1 trillion annually to implement the SDGs. The global Islamic finance industry, with total assets of US$3.06 trillion as of 2021, has the potential to contribute significantly towards the existing funding gap.
16. In Malaysia, green and SRI sukuk issuances have served as a bridge between Islamic finance and sustainable investment. Malaysia has successfully implemented environmental, social and governance (ESG)-themed funds and multiple green sukuk (Islamic bond) issuances, under the ASEAN Green Bonds and Green Sukuk standards. As of December 2022, a cumulative RM8.3 billion of green and SRI sukuk has been issued since the instrument’s launch in 2014.
17. Key recent enablers include the Securities Commission’s Sustainable and Responsible Investment linked (SRI-linked) Sukuk Framework to facilitate businesses in financing their transition towards achieving their sustainability targets and Bursa Malaysia’s upcoming Voluntary Carbon Market (VCM) exchange. The Shariah-compliant VCM will enable Malaysian companies to purchase voluntary carbon credits to offset their carbon emission footprint and to support financing for projects and solutions that reduce, remove or avoid greenhouse gas emissions.

 

Ladies and gentlemen,

18. That brings me to the end of my address. To conclude, I wish to congratulate the recipients of the Islamic Finance Pupillage Certification once again. Attaining the certification adds value to your portfolios in a market where highly competent professionals are sought after.
19. I would also like to thank all the partners, stakeholders and the MIA team for facilitating this pupillage programme.
20. Going forward, MIA looks forward to organising further editions of the Mini Pupillage Programme for the benefit of our members working in Islamic finance. The Programme leverages on blended learning which is suitable for working adults in enhancing their existing skillsets especially in today’s challenging environment. We have also received encouraging feedback on the virtual classes of the IF Pupillage Programme – students enjoy the close engagement, and the open and interactive discussions with the trainers on the current and emerging issues faced by the industry.
21. Many thanks are especially due to the efforts of our highly competent and dedicated trainers who represent various segments from the industry. MIA thanks you for sharing your expertise and experience to develop Islamic finance talents who are competitive and relevant in a continuously evolving market.
22. As we move ahead, MIA looks forward to further collaboration with talents, stakeholders and industry experts to advance our advocacy for Islamic finance. This will be vital to support the Government’s call for building capacity and competency to drive industry growth and sustain Malaysia’s iconic status as a global Islamic finance leader. Our efforts are central to socioeconomic development, and I hope that you will continue to partner with us on our shared nation building purpose.

 

Thank you and do enjoy the programme.