BNM tells SMEs to look past misconception into Islamic financing facilities

TheEdge Mon, Jan 14, 2019 01:53pm - 5 years View Original


KUALA LUMPUR (Jan 14): More than half of the country's small and medium enterprises (SMEs) are not fully aware of the availability of Islamic business financing facilities, due mainly to misconception surrounding eligibility for it, said Bank Negara Malaysia (BNM).

Speaking at the "Islamic Finance Rendezvous Series" in Penang recently, BNM assistant governor Adnan Zaylani Mohamad Zahid said Islamic finance can act as an enabler of growth to SMEs, in areas such as supply chain finance, coverage in takaful products at competitive prices, sukuk as an alternative form of financing for businesses, and the Investment Acount Platform for ventures.

"A recent survey we did revealed that almost 60% of SMEs were not aware of the availability of Islamic business financing facilities. Indeed, most SMEs adopted conventional financing. Some may still have the misconception that Islamic finance is only for Muslims.

"I would like to emphasise that the practice of Islamic finance is not and should not be exclusive to Muslims. Many of its underlying ideas, the pursuit of economic justice and risk sharing align with traditional and conventional economic thinking," he said in his speech.

He added that at the national level, the government is indeed supportive of the role of Islamic finance as an important tool to assist businesses and SMEs to flourish, highlighting the SME-Shariah Compliant Financing Scheme of RM1 billion as an example.

"All Islamic finance transactions must reflect Islamic values which are ethical and fair. Businesses can therefore take assurance that their financial needs are well served, managed and protected," he said.

"Mutual insurance companies which derive from risk sharing, limited-purpose banking which moves away from interest-based or fractional banking and equity financing, are all ideas consistent with Islamic finance principles, and are practised across the world without any reference to the religion. Indeed, Islamic finance is for all," he added.

As at end-September last year, Islamic banking assets stood at RM874 billion or 30.4% of total banking assets as at end September last year, with an annual growth of 10% over the past three decades.

Takaful contributions amounted to RM1.7 billion with market penetration at 15%, according to BNM.

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