KUALA LUMPUR: The way forward for the Islamic capital market (ICM) in Malaysia is to consider introducing an Islamic social exchange in the near future to strengthen environmental, social and governance (ESG) programmes, especially to support the poor and the needy, said Securities Commission Malaysia (SC) chairman Datuk Seri Awang Adek Hussin.
He said ICM in Malaysia needs to be more inclusive and better aligned with the ESG requirements.
"The Sustainable Responsible Investment (SRI) framework through SRI sukuk and SRI-linked sukuk is very much efforts in that direction.
"SRI-linked sukuk enabled financing for companies in transition along their sustainability journey, for example, from brown to green," he said at the 21st Islamic Financial Stability Forum (IFSF) 2023 today.
Awang Adek said while the world is now embarking on the new sustainability journey, Malaysia's ICM initiatives have always been deeply rooted in ethical, socially responsible, and sustainable practices, as required by the Shariah.
"Perhaps it is now time to move to Shariah-plus where everything should be aligned as close as possible to the intent and objective of the Shariah or Maqasid al-Shariah," he said.
He also said that another dimension would be the implementation of social finance through the waqf-featured fund framework, which allows investors to give dividends from unit trusts and wholesale funds to charity.
As of December 31, he said the ICM in Malaysia accounted for 64.5 per cent of the entire capital market, totalling US$500 billion (US$1=RM4.64).
"Within the ICM, 46 per cent of the total (US$232 billion) represents market capitalisation of Shariah-compliant securities, and 54 per cent is sukuk outstanding (US$268 billion)," he said.
Awang Adek noted that SC's collaboration with the Islamic Financial Services Board (IFSB) on its technical committee and other initiatives has contributed towards the development of 23 standards, four technical notes and six guidance notes issued by IFSB to guide regulatory and supervisory authorities in Islamic finance worldwide.
He added that the SC plans to issue guidance on principle-based Maqasid al-Shariah compliance by year-end to meet the need of investors looking for more compliance. – BERNAMA