Deepening the Islamic Capital Market

The SC continued to strengthen ICM’s value proposition through widening access to Shariah-compliant funding, instilling greater impetus for Islamic social finance, and encouraging Islamic fintech growth.

  • Widening Access to Shariah-Compliant Funding

    Facilitating Shariah-compliant financing for unlisted MSMEs

    To facilitate a conducive funding ecosystem within ICM and advance the development of market-based financing avenues to support the Halal economy, the SC introduced a Shariah Screening Assessment Toolkit for the Unlisted Micro, Small and Medium Enterprises (Toolkit). The Toolkit provided guidance in screening the Shariah status of unlisted MSMEs for ECF and P2P financing platform operators and Shariah advisers, among others. 

    With the launch of the Toolkit, it is envisaged that unlisted MSMEs will have wider options to access Shariah-compliant financing via ECF and P2P financing platforms. At the same time, it would also provide greater opportunities for investors seeking diversified Shariah-compliant investment portfolios across asset classes and economic sectors. 

    The Toolkit included a series of assessment questions based on the Shariah screening methodology for unlisted MSMEs, endorsed by the SC’s Shariah Advisory Council (SAC). 

    The Shariah screening methodology adopts a two-tiered quantitative approach in determining the Shariah status of unlisted MSMEs. (Figure 1)


    Business Activity Benchmarks

    The contribution of Shariah non-compliant activities to revenue and profit before taxation is to be computed and compared against the relevant business activity benchmarks, both of which must be less than the benchmarks.





    Financial Ratio Benchmarks

    Cash over total assets

    Cash only includes cash placed in conventional accounts and instruments. To be classified as Shariah-compliant, this ratio must be less than 33%.

    Debt over total assets

    Debt only includes interest-bearing debt. To be classified as Shariah-compliant, this ratio must be less than 49%.

    The Toolkit was launched at the inaugural SC-HDC Forum 2021, themed ‘Enabling Growth through the Islamic Capital Market’ on 5 August 2021, to raise awareness on Shariah-compliant market-based financing for MSMEs.

    Increasing Shariah-compliant offerings via ECF and P2P financing markets

    The Islamic ECF and P2P financing markets continued to provide MSMEs with an alternative and viable option for Shariah-compliant financing. The amount raised through Islamic ECF and P2P financing markets grew significantly in 2021 to RM225.9 million (2020: RM1.5 million), benefitting 136 MSMEs.

    Further, as at 31 December 2021, the number of platform operators with options to offer Shariah compliant financing to the various segments of MSMEs had increased to six, compared to four in the previous year.

  • The FIKRA Islamic Fintech Accelerator Programme

    FIKRA is a joint initiative by the SC and the UN Capital Development Fund (UNCDF). The objective of FIKRA is to further enhance the ICM ecosystem by identifying and scaling innovative fintech solutions in Malaysia. FIKRA connects innovative start-ups through a collaborative environment for mentors, investors, and industry enablers, along with relevant regulatory guidance, primarily through a three-month accelerator programme. FIKRA also focuses on helping position ICM as an attractive segment for building career by creating a talent pipeline through increased awareness of opportunities in Islamic fintech.

  • Driving Islamic Social Finance

    Promoting Islamic social finance via Waqf-Featured Fund Framework

    The launch of the Waqf-Featured Fund Framework (WQ-FF) in November 2020 had facilitated the offering of unit trust funds and wholesale funds with waqf features that integrate commercial and social objectives. The WQ-FF provided investors with opportunities to invest and participate in products that could deliver sustainable benefits for society. As at 31 December 2021, four funds were issued under the WQ-FF.

    Furthering thought leadership via SC-OCIS Roundtable

    Since its inception in 2010, the annual SC and Oxford Centre for Islamic Studies (OCIS) Roundtable (SC-OCIS Roundtable) continues to stimulate discussion and discourse on Islamic finance to facilitate the developmental agenda for the ICM.

    The 12th SC-OCIS Roundtable was organised virtually on 23-24 September 2021, with the theme ‘Transforming Islamic Finance through Impact Finance and Social Agenda – Based on Maqasid Al-Shariah’. The Roundtable was graced by His Royal Highness Sultan Nazrin Muizzuddin Shah, Sultan of Perak and the Royal Patron for Malaysia’s Islamic Finance Initiative, who delivered a special keynote address.

    Attended by a select group of 60 delegates from across the globe, the discourse revolved around the need for a new social contract and how Islamic finance can be a beacon to lay the foundations for a new balanced market-based system and greater social objectives. The discussion also delved into the Fourth Industrial Revolution, how innovation in science and technology could reconcile the debt-based economy and drive better funding solutions in achieving the core virtues and values of Islamic finance.

  • Strengthening Shariah Governance Framework

    As part of efforts to strengthen the ICM Shariah Governance Framework, the SC revised the Guidelines for Shariah Advisers, ensuring that the framework remained adaptive to respond to market developments.The revised framework, among others, required Shariah advisers to enhance their knowledge and expertise on capital market developments.

    As at 31 December 2021, a total of 81 Shariah advisers, comprising individuals and corporations were registered with the SC.
  • Continuous Efforts to Recognise and Develop Thought-Leadership and Capabilities

    Royal Award for Islamic Finance

    The Royal Award for Islamic Finance (The Royal Award) was first established in 2010 as a joint initiative by the SC and BNM to recognise outstanding and inspiring individuals who had contributed significantly to the advancement of the Islamic financial services industry.

    The global nominations for The Royal Award 2022 opened in December 2021 until March 2022 with the introduction of two new categories to further promote the development of Islamic finance globally, namely the Emerging Leader Prize and the Impact Challenge Prize. The new categories will serve to recognise young international talent with outstanding contributions to the advancement of Islamic finance and innovative ideas and solutions that can enable and empower impacted communities globally.

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