KUALA LUMPUR, Sept 26 — The ringgit has been rising steadily against the US dollar, notably since early July, following greater clarity of the interest rate path of developed countries, especially that of the United States, according to Bank Negara Malaysia (BNM).

Deputy governor Adnan Zaylani Mohamad Zahid said the narrowing of interest rate differentials with the US would be conducive for portfolio inflows, especially given Malaysia’s positive economic prospects.

"The domestic landscape is also quite positive. Ongoing government structural reforms, subsidy rationalisation and social protection enhancements offer a window of opportunity to pursue meaningful change.

"Furthermore, the coordinated actions between the government and BNM, which has already facilitated a better balance for (fund) flows, will continue and this will provide sustainable support for the ringgit.

"Importantly, ongoing structural reforms by the government, coupled with improving economic prospects, will continue to sustain global interest for investment in Malaysia,” he said yesterday at the IFN Asia Forum 2024.

Ahmad Zaylani emphasised sustainability as a key focus for Malaysia, noting that the country has already set its goals and plans in motion, which is to optimise diverse sukuk structures to fund a smooth transition to a sustainable economy, particularly for emerging markets.

He highlighted that in Asia, an estimated US$1.7 trillion is needed annually for new infrastructure, with a significant US$800 billion gap in climate financing, especially in renewable energy. Over the next five years, more than US$138 billion is required to meet net-zero targets by 2050, double the current investment levels. "Government revenues alone cannot meet these needs. Sukuk has the potential to catalyse wider funding sources in this space both for the government and private sector,” he said.

In Malaysia, sukuk is an important funding tool in supporting the funding needs of the economy. A total of US$56 billion of sukuk was issued in 2023, with a high concentration in renewable energy and green real estate.

"I believe there is a great opportunity to further leverage Asia’s strength in sustainability bond issuance by synergising with Malaysia’s expertise in Islamic finance. The region also held a 23 per cent share of the global ESG sukuk market, underlying its potential to advance Islamic sustainable finance.

"Malaysia, in particular, has been at the forefront of this movement, continuing to lead with innovative strides in the market and since pioneering the world’s first green sukuk in 2017,41 corporate sukuk have been issued under the Sustainable and Responsible Investment Sukuk Framework, raising over US$6.67 billion,” he added.

Adnan Zaylani also highlighted the need to expand takaful to address protection gaps and in Malaysia, with the takaful sector having shown strong growth. He said over the past decade, the market share has doubled to 23.4 per cent, and family takaful contributions reached 19.8 per cent in 2023 — reflecting its growing role in the insurance industry.

Since the launch of the Value-based Intermediation for Takaful (VBIT) framework in 2022, the industry has focused on value-driven growth, emphasising empathy and inclusivity in financial protection. Takaful operators now offer coverage to previously excluded groups, such as individuals with learning disabilities or special care needs.

This progress is supported by the Malaysian Takaful Association’s Maqasid Shariah Scorecard, which aligns key performance indicators with Islamic finance’s ethical values. "We anticipate that this scorecard will be fully implemented by the second half of 2025,” he said.

The third priority is strengthening international partnerships to unlock green investment opportunities.

He said Malaysia’s solid economic fundamentals and mature Islamic finance ecosystem position the country as a natural hub for Shariah-compliant investments.

"To ensure the industry stays agile and ready to seize evolving green investment opportunities, Malaysia needs to strengthen ties with strategic international partners with active industry stewardship and foster a Shariah-compliant green funding ecosystem,” he advised.

Finally, he said looking ahead to Malaysia’s Asean chairmanship next year, BNM is committed to establishing deeper collaborations across the region. The central bank, in partnership with fellow regulators such as the Securities Commission, is actively working to unlock the potential of new growth sectors by integrating Islamic finance with sustainable finance initiatives. "At the regional level, we believe that innovative financial solutions, including Islamic financial instruments, are key to supporting the sustainability agenda of Asean countries,” he said. — Bernama