Special Address by En Mohd Muazzam Mohamed, Chairman – Islamic Finance Committee, Malaysian Institute of Accountants at The MIA Islamic Finance Conference 2021 “Islamic Finance: Latest Developments and Drivers for Growth in a Post-Pandemic World”
Distinguished speakers, Esteemed participants, Ladies and Gentlemen, السلام عليكم ورحمه الله وبركاته and Good morning.
It gives me great pleasure to welcome all of you to the MIA Islamic Finance Conference 2021. This year virtual conference, which began yesterday, is structured to provide insights into the latest developments of Islamic Finance and drivers for its growth in a post-pandemic world – featuring the industry top experts and key figures as speakers.
Despite the highly uncertain economic and challenging operating environment, the Covid-19 pandemic has presented a unique opportunity for Islamic Finance to unleash its true potential. It has provided an impetus for the industry to enhance its role in delivering the higher purpose of Shariah, which revolve around ‘Preservation’.
Over the last 18 months since the pandemic came about, the Islamic finance industry has dedicated much of its development efforts to address the threats and challenges posed by the pandemic, making its impact on building social resilience, facilitating economic recovery as well as championing sustainability agenda.
Throughout the prolonged period of Covid-19 crisis, the industry has been proactive in assisting customers, particularly through various financial relief measures to alleviate the financial difficulties caused by the pandemic – starting from automatic payment moratorium to targeted payment assistance and, more recently, the extended financial support scheme under URUS to promote long-term financial resilience.
Notably, the Islamic Finance principle of prohibiting compounding charges was also adopted as the market practice by the conventional counterparts during the deferment period – highlighting the positive influence of Islamic Finance on the broader financial industry.
To support the third component of Islamic economy, which is social welfare or ijtima’iy, concerted efforts have been geared by the Industry to advance social finance agenda by harnessing the potential of sadaqah, waqf and zakat. Now more than ever, it is critical for the Islamic Finance industry to strengthen its role by championing Social Finance to move Malaysia closer to the ideal path of a more inclusive, equitable and sustainable growth. Islamic finance can be the lever for a shared prosperity and a more equitable distribution of wealth to strengthen the society’s wellbeing and nation’s resilience.
For this, yesterday’s panel discussion on Waqf Commercialisation and its Sustainability was designed to enhance awareness and understanding on waqf as an instrument for social impact creation and nation building. Equally critical was the discussion yesterday on ensuring good governance and management for efficient, transparent and professional management of Waqf assets.
The launch of the Waqf features fund framework by the Securities Commission of Malaysia in 2020 has further promoted greater public participation in charitable act of waqf for creation of meaningful perpetual benefits. Through myWakaf as a platform for Islamic Banks to collaborate with State Islamic Religious Councils (SIRC), multiple waqf projects for the community across the country have also been successfully completed, among others, for construction of haemodialysis centres, dental clinic, muallaf shelters and boats. With the Government soon will be introducing a National Waqf Master Plan under the 12th Malaysia Plan, I believe it will further harness the full potential of waqf and elevate the recognition on Islamic Finance.
With many losing employment or source of income during the pandemic, the industry continuously explores new innovative financial products and services to create financial solutions that can nurture micro-entrepreneurship to help those affected rebuild their livelihoods. Towards this end, a few Islamic banks in collaboration with strategic partners have blended traditional banking offerings with Islamic Social Finance instrument like sadaqah and zakat to create affordable microfinancing products, known as iTekad, that is provided along with structured business coaching and training to ensure effective business nurturing.
To avail more funding options, the SC has also introduced Shariah screening assessment toolkit for unlisted MSMEs to allow greater access to tap funding from Shariah-compliant investors through market-based crowdfunding platforms such as equity crowdfunding (ECF) and peer-to-peer financing (P2P).
On this note, today’s sessions on Learning from the Leaders and the Panel Discussion on Islamic Micro-Financing – Reaching out to the Impacted in Society will provide deeper insights into some of these innovative Islamic social finance solutions introduced by the industry to drive shared prosperity and support the wellbeing of Malaysia, especially those underserved, unbanked and severely impacted by the pandemic.
Ladies and gentlemen, during yesterday’s session on the Islamic Capital Market Outlook, our expert speaker not only looked at the trends and prospects of the Islamic capital market, but he also touched on the topic of Green Sukuk, ESG and SRI, all of which, relate to the broader sustainability agenda.
It is important to note that, sustainability is no longer just an ‘investment theme’ or ‘a novel approach to investing’. Accelerated by the Covid-19 pandemic, sustainability is now a mainstream agenda across all financial sectors – and it is very much a relevant agenda particularly for Islamic Finance, requiring the Islamic banking and takaful sectors to also be the catalysts for wider sustainability adoption.
As Islamic Finance has inherent considerations that include, among others, being ethical, sustainable, responsible, transparent, green, equitable, IFIs have a natural duty to do more as financial intermediary – they need to generate positive and sustainable impact on the economy, community and environment.
For the Islamic banking and takaful sectors, the shared vision and commitment to champion sustainability agenda has been anchored upon the Value-based Intermediation (VBI) framework by BNM. Through the formation of VBI Community of Practitioners as a collaborative platform, the Islamic banks in Malaysia have been able to come together to spearhead development of sustainability initiatives for the financial industry, among others, the Value-based Intermediation Financing and Investment Impact Assessment Framework (VBIAF) Sectoral Guides.
VBIAF is an impact-based risk management toolkit to guide incorporation of environmental, social & governance (ESG) risk considerations in decision making process that was developed jointly by Islamic banking industry with relevant stakeholders such as World Wide Fund for Nature (WWF), Energy Commission (EC), Sustainable Energy Development Authority (SEDA), and Malaysian Green Technology and Climate Change Centre (MGTC).
To date, six (6) VBIAF sectoral guides have been issued, with the first cohort for Palm Oil, Renewable Energy and Energy Efficiency Sector have been finalised, while the second cohort for Oil & Gas, Manufacturing and Construction & Infrastructure sectors are now being published for public feedback.
Ladies and gentlemen, as the pandemic has accelerated technology adoption and acceptance, digital knowledge and literacy have become very critical to everyone in order to remain relevant. For this, I really hope the panel discussion on Fintech yesterday that focused on digital innovation as a means for Islamic finance to realise its potential and achieve the scale and access has been very insightful and of great value. The discussion on Malaysia’s comprehensive regulatory approach to regulate and systematically develop the fintech industry is an area that we should constantly monitor as fintech is expected to play an increasingly important role in accelerating Islamic Finance development.
Additionally, today’s final session on Tax Developments in Islamic Finance will also cover Digital Finance, linking it back to the domain and expertise of MIA in assessing the impact of taxation, tax governance and digitalisation on Islamic finance institutions. MIA will continue to emphasise on fintech and digitalisation as part of its advocacy for Islamic finance advancement moving forward.
Ladies and gentlemen, as Islamic Finance industry in Malaysia continues to evolve rapidly, the Islamic Finance Conference has now become one of the key elements for MIA, as the developer and regulator of the accountancy profession, to fulfil the development needs of its members in supporting Malaysia as the Islamic Finance Hub 2.0 as envisaged under the Shared Prosperity Vision 2030. The annual conference is further complemented with the ongoing mini-pupillage programme offered by MIA to upskills talents with Islamic finance knowledge.
The publication of the MIA textbook on Accounting for Islamic Finance in 2020, led by the MIA IF Committee and the Malaysian Accountancy Research and Education Foundation (MAREF), is another major milestone in MIA’s efforts to support Islamic Finance development in Malaysia. The textbook not only bridges the gap in knowledge on applying MFRS for Islamic finance transactions within the Islamic finance sector but is part of MIA’s integrated strategy to help develop competencies and capacity among accountants working in Islamic finance as well as Islamic financial institutions. I would like to encourage everyone to download the 436-pages textbook that is made available for free on MIA’s website.
In ending my address, I would like to thank all the speakers and participants for your interest to advance Islamic Finance together. On behalf of the Islamic Finance Committee and MIA, I would also like to thank all parties that collaborated to organise this Conference. The agenda for the Conference is curated to be very forward-looking and will contribute to the advancement of the industry. I trust that all participants will be able to apply the knowledge acquired over these two days for the benefit of your organisations as well as for personal development. As we move forward, MIA and the Islamic Finance Conference are committed to devising and rolling out more initiatives that will support the growth of the Islamic finance sector and Islamic finance professionals, so do stay tuned.
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