Kuala Lumpur: Malaysia saw a significant rise in sustainable and responsible investment (SRI) sukuk issuances last year, reaching RM11.9 billion – an almost ninefold increase since its introduction in 2017 – thanks to a supportive regulatory framework.
According to BERNAMA News Agency, in its Annual Report 2024, Bank Negara Malaysia (BNM) highlighted that the SRI Sukuk market is poised for further growth, driven by priorities in energy transition, social inclusivity, and sustainability under the MADANI economy framework. The agenda aligns with Malaysia’s 12th Malaysia Plan (2021-25), particularly Theme 3, which focuses on advancing green growth, enhancing energy sustainability, and transforming the water sector.
BNM emphasized that these strategic focus areas reinforce the ongoing push for sustainable financing, positioning SRI Sukuk as a key instrument in achieving the country’s long-term sustainability goals. Within this supportive framework, Malaysia’s ecosystem is well-equipped to facilitate SRI sukuk issuances. The country is also positioned to support the growth of the green sukuk market domestically and globally, with various efforts underway by BNM and market participants to scale up green sukuk adoption and establish Malaysia as a gateway for Islamic finance.
Meanwhile, BNM announced its continued promotion of the issuance of green and SRI sukuk to meet the expanding financing needs in renewable energy, biodiversity, and public infrastructure projects, in line with the projects identified in the National Energy Transition Road. Regionally, Malaysia has been instrumental in establishing the ASEAN Green Bond Standards, ensuring alignment with international best practices while addressing regional needs.
Through collaboration with the ASEAN Capital Markets Forum, Malaysia also supports efforts to enhance regional capital markets by focusing on sustainable finance, responsible investment, and strengthening environmental, social, and governance (ESG) disclosure frameworks. This will eventually position Malaysia as a leader in advancing responsible investment practices within ASEAN’s sustainable finance framework, according to BNM.
Furthermore, BNM continues to support the issuance of ringgit-denominated sukuk by residents and non-residents for use in Malaysia through a facilitative foreign exchange policy. A key objective is to scale up the issuance of SRI instruments to finance climate resilience, energy efficiency, and social impact projects. This commitment underscores Malaysia’s leadership role in fostering innovation and growth in the green finance sector within the ASEAN region.
Additionally, the introduction of the Islamic Collateralised Funding Policy Document (ICF PD) in June last year resulted in the volume of Islamic interbank repo transactions surging to RM42.6 billion in 2024 from RM12.6 billion in 2023, indicating strong market adoption and growing liquidity. The ICF PD provides a structured framework and standards for Islamic repo transactions, thereby improving the overall functioning of the Islamic Interbank Money Market (IIMM). BNM noted that the standardisation of Islamic repo transactions within the IIMM has promoted the efficiency and activity of the interbank market, facilitating short-term funding and liquidity management among Islamic financial institutions in Malaysia.