Policies should prioritise vulnerable groups

KUALA LUMPUR: Policies should be crafted and prioritised for vulnerable groups that have been hit by the Covid-19 pandemic and are experiencing slower recovery, says Bank Negara governor Datuk Abdul Rasheed Ghaffour.

He said the current economic climate remains challenging due to multiple headwinds from global developments but the Malaysian economy continues to show resilience against these shocks.

“Malaysia has recovered well from the pandemic. Our economic growth has been forthcoming.

“Fundamentally, growth is being supported by the diversified economic structure, including in exports markets and products, and favourable labour market conditions that continue to drive consumption as the key engine of growth for Malaysia,” he said at the Kuala Lumpur Islamic Finance Forum 2023.

Abdul Rasheed, however, noted that statistics showed the economic rebound from the pandemic has been uneven.

He said the World Bank recently highlighted that nearly 70% of Malaysian lower-income households assessed themselves as having inadequate financial resources to meet their monthly basic needs.

“It is clear that there are still more that we can and must do to tackle these challenges.

“This entails prioritising policies to rebuild retirement savings, improve targeting and effectiveness of social programmes, enhance social safety nets, encourage active labour participation and facilitate orderly transition to a greener ecosystem,” he added.

Meanwhile, Abdul Rasheed said Bank Negara is embarking on a holistic review of the standards on syariah contracts to simplify the framework’s design and policy approach.

This is to spur innovation while ensuring effective application of syariah principles as an important enabler of value-based finance, he said.

“At Bank Negara’s end, we are committed to provide a conducive regulatory environment for innovation to take place. The Financial Sector Blueprint 2022-2026 outlines our regulatory focus on fostering market dynamism.

“We are progressively reviewing relevant standards including the Investment Account Policy Document to enable the industry to advance unique, purposeful and innovative propositions – guided by the principles of parity, proportionality and neutrality,” he said.

He said the latest national economic transformation plans, including the National Energy Transition Roadmap and New Industrial Master Plan, will necessitate more adept use of wider funding mechanisms.

“Funding the country’s economic and sustainability transition is estimated to require about RM1.4 trillion by 2050. The immediate funding needs involve projects that are nascent and are much more varied in terms of its market return profiles.

“There is significant opportunity for Islamic finance to demonstrate its catalytic role and impact by making full use of the tools available for financial innovation in addressing these evolving needs of the country.

“These include instruments such as sukuk, syndicated financing and blended finance on a much larger scale,” he added.

Abdul Rasheed said a tool that is available to Islamic banks in Malaysia for this purpose is by leveraging on investment accounts (IA) to intermediate impact-driven investments.

The industry can more actively mobilise new sources of funding while expanding the underlying assets funded by IA towards Sustainable Development Goals-aligned projects.

“The features of IA can be versatile – it can even ‘blend’ well with social finance mechanisms, taking inspiration from notable innovations in Sustainable and Responsible Investment-sukuk structures,” he said.