Bank Negara Malaysia to issue Shariah contract framework this year

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BNM issues Shariah framework

Highlights

Bank Negara Malaysia will issue a strategy paper and exposure draft for a new Shariah contract framework in 2024 to encourage wider use.
The next Islamic finance blueprint will focus on aligning strategies with higher-value sectors, renewable energy, and resilience against climate and economic shocks.
BNM prioritises innovation for underserved households and businesses, while supporting the growth of halal micro, small and medium enterprises.

This article was translated from the original. Read the original version by our correspondent here.

Framework review and policy direction

As reported by The Edge Malaysia, Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour said BNM will issue a strategy paper and exposure draft on the Shariah contract framework this year during his special keynote address at the Kuala Lumpur Islamic Finance Forum, KLIFF 2026, on Tuesday. He said the framework is currently being reviewed to encourage wider and more effective use of Shariah contracts.

On 11 Nov 2024, the central bank published a discussion paper on the Shariah contract framework outlining the proposed approach to reviewing existing policy documents based on Shariah contracts. The document covers the proposed framework design, alignment of Shariah contract applications with their original objectives, recalibration of Shariah and operational requirements, as well as the review strategy and timeline.

In the referenced statement, the initiative aims to support the diverse application of Shariah contracts by Islamic financial institutions, in line with the strategies of the Financial Sector Blueprint 2022-2026.

New blueprint priorities and sector impact

Abdul Rasheed said the next blueprint will prioritise aligning strategy and capital with purpose, including directing resources towards higher-value sectors and renewable energy, while strengthening resilience against climate and economic shocks. He said the second priority will focus on innovation based on the real needs of households and businesses, particularly in underserved or unmet areas.

Among the areas mentioned is financial and technical support for the expansion of halal micro, small and medium enterprises. He also stressed that the third priority is to uphold values such as fairness, integrity and empathy as the foundation of business decisions and market conduct, with maqasid Shariah serving as a guide towards more impactful value-based outcomes.

The two-day KLIFF 2026 forum, which began on Tuesday, brought together more than 400 registered delegates from around the world. The attendance reinforces its position as one of the region's leading platforms for Islamic banking and finance.

MARC Ratings' warning on Malaysia's need to strengthen its fiscal buffers highlights that global shocks such as geopolitical tensions, pandemics and climate risks must now be regarded as permanent factors in government planning. The report also outlines pressure from a period of high interest rates and bond yields, alongside limited fiscal space as operating expenditure reaches around 82% of government spending. Measures highlighted include broadening the tax base and improving targeted fuel subsidies to increase fiscal flexibility.

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