Kuala lumpur: Islamic finance has gained momentum in ASEAN with emphasis on value-based principles, balanced risk-reward considerations, and wider benefits for society and the environment as global interest in ethical and sustainable finance expands, says Bank Negara Malaysia (BNM). The central bank noted that Islamic finance is increasingly sought after for providing financial solutions that create long-term propositions beyond mere profits.
According to BERNAMA News Agency, BNM's Annual Report 2025 released today highlighted that what started primarily as an offering to meet Muslim consumers' needs has evolved into a dynamic segment of the regional financial system. 'Increasing demand for shariah-compliant solutions, given the range of diverse options and stronger policy support across several ASEAN economies, are the main forces driving this growth,' the report stated. Since 2014, Islamic financial assets in ASEAN have more than doubled from US$468 billion to US$954 billion in 2024. Notably, the rise of Islamic finance is also evident in countries such as Singapore and the Philippines, which are largely non-Muslim societies, reflecting its broader appeal.
BNM further elaborated that Islamic finance is increasingly being channelled toward green and transition-related activities. Indonesia and Malaysia account for a 45 percent share of the global sustainable and responsible investment (SRI) and environmental, social, and governance (ESG) sukuk outstanding in 2024. This alignment with broader ESG objectives reinforces the sector's role as a catalyst for sustainable development. BNM has also developed practical tools to support the transition of SMEs, recognising their importance in the economy.
Amid the growing size and maturity of key segments within Islamic finance ecosystems in ASEAN, the central bank reported that cross-border sukuk issuances, investment flows, and financial partnerships are beginning to support greater regional integration. Such integration is crucial to broadening the pool of market participants, diversifying instruments, deepening liquidity, and mobilising capital flows across the region.
As of 2025, nine participants from ASEAN took part in Malaysia's commodity trading platform, known as Bursa Suq Al-Sila' (BSAS), with a combined transaction value of RM55.9 billion for the year. Their participation in BSAS primarily supports their operations for shariah-compliant financing, deposit-taking, and investment activities.
BNM pointed out that Islamic finance in ASEAN remains a journey in progress, with its future depending on collective advancement rather than the performance of any single market. Regulatory cooperation, alongside deeper engagement among regulators to support cross-border activities while safeguarding financial stability, will be vital. Stronger collaboration among market participants will also be essential, the central bank emphasized.