Saturday, May 15

BNM publishes new VBI assessment framework, scorecard

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Deputy Finance Minister Datuk Amiruddin Hamzah (right) and Nor Shamsiah (second right) during the Global Islamic Finance Forum 2018 at Sasana Kijang yesterday. — Bernama photo

KUALA LUMPUR: Bank Negara Malaysia yesterday published a new assessment framework Strategy Paper on Value-based Intermediation (VBI) Impact Assessment Framework (VBIAF) and the VBI Scorecard.

Bank Negara Malaysia (BNM) governor Datuk Nor Shamsiah Mohd Yunus said the central bank is also seeking feedback via public consultations.

“I look forward to receiving constructive feedback from the industry and interested parties, and to further strengthen these frameworks to drive a renewed focus on sustainable financial solutions,” she said in her speech at the Global Islamic Finance Forum 2018 yesterday.

The two-day forum, themed “Value-Based Intermediation – Beyond Profit” is taking place at Sasana Kijang.

Nor Shamsiah said the world economy has expanded six-fold despite experiencing the worst and most expensive financial crisis.

“Average per capita income has more than doubled to about US$11,000, compared to only about US$5,000 in 1967. People are living longer, with better quality of life, greater access to basic necessities, improved health and medical care, and better education,” she said.

Despite such progress, she noted, there are challenges, including the harmful effects of environmental degradation and climate change that threaten global prosperity, stability and sustainable living.

“Socioeconomic challenges such as rising inequality and lack of affordable housing are affecting the well-being of many communities. At around 225 per cent of global Gross Domestic Product, global debt is at a record high level and may leave a heavy burden for future generations to bear,” she said.

She said the VBIAF would provide guidance on the assessment of financing and investment applications taking into consideration economic, social and environmental impacts, while the scorecard supports the implementation of performance measurement frameworks for Islamic financial institutions that drive positive value and impact on society and the environment.

Nor Shamsiah also said the central bank foresees the adoption of VBI having a significant impact on business models of Islamic financial institutions, including the drivers of profitability and risks.

“VBI-oriented Islamic financial institutions can, and indeed should, also play an important role in mobilising resources to finance climate change mitigation and adaptation initiatives.

“Funding for climate adaptation, in particular, remains critically low, despite millions already at risk from the effects of climate change and in need of assistance to cope with the effects,” she added.

Citing the agriculture sector as an example, she added that resources can be channelled towards building flood defences, and developing local structures and facilities that are more resilient to harsh weather conditions.

“Takaful solutions also have an important role in strengthening resilience against climate events,” she said.

The commitment to adopt VBI, supported by the central bank, is a significant step by the industry to clearly identify Islamic finance with sustainable practices, and it has also set in motion initiatives that will raise the bar for processes, practices, offerings and conduct that promote sustainable businesses and communities. — Bernama