ContextPresentation by Abdul Rasheed Ghaffour, Governor of the Central Bank of Malaysia (Bank Negara Malaysia), at the Financial Institutions' Directors Education (FIDE) Forum “Advancing Islamic finance as part of the national agenda”, Kuala Lumpur, 24….
Why it mattersPresents Islamic finance as a tool to fund Malaysia's industrial and energy strategies, where manufacturing finance falls short of needs.
- Global growth is softer and external buffers are thinner.
- Financing for manufacturing remains small relative to the investment required.
- Institutions must gain scale and relevance without trying to do everything.
- Align financing with national strategies such as industrial and energy plans.
- Develop sector-focused products and longer investment horizons.
- Build depth in sector and technology intelligence.
Read the speech summary
1. A changing growth model
Bank Negara Malaysia Governor Abdul Rasheed Ghaffour told an Islamic finance gathering that Malaysia's economy, now worth over RM2 trillion after growing almost seventeenfold since 1990, must now rely on quality rather than volume. He expects growth of about 4–5% in 2026 and points to four shifts: more complex, higher-value industries; productivity from technology, capital and talent; stronger domestic capabilities; and an energy transition requiring large investment. National plans for industry, semiconductors, energy and the halal sector set the direction, and investment incentives now reward value created rather than amounts invested.
2. Finance is not yet following
Banks, he says, will largely decide whether capital reaches those priorities, yet lending still goes mostly to services and remains small for manufacturing relative to needs. He attributes this not to reluctance but to information gaps, complex deal structures and unfamiliarity with new sectors, and asks whether lenders are still funding the old economy instead of the next one.
3. Islamic finance's opportunity
Islamic banks now provide nearly half of all financing, up from about a quarter in 2015, and the Islamic capital market from RM420 billion to RM670 billion, holding over 60% of the market. With established skills in structuring, Shariah governance and risk management, he argues the sector should use its strengths, risk-sharing and flexible structures, for long-term, specialised or underserved needs. That calls for sector and technology expertise, more sophisticated structuring, patient risk capital and better data, systems and talent.
4. Roles and national goals
He assigns tasks: boards should choose where they can make the biggest difference and reflect it in risk appetite and capital allocation; management should execute through new skills and partnerships; Shariah committees should engage early to support innovation within principles. Regulators too must shift from supervising what exists to enabling what should exist, without lowering standards. Institutions should draw on the wider ecosystem rather than build everything alone. Linking to the central bank's 2027–2030 blueprint, he says Islamic finance should be judged by how far it improves welfare, from longer, more secure lives to better jobs and a greener economy, by combining credit, equity and philanthropic capital.