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BNM seen more accommodative towards facilitating alternative financing needs in blueprint

25/01/2022 01:31 PM

KUALA LUMPUR, Jan 25   -- Bank Negara Malaysia (BNM) has been seen to be more accommodative in facilitating alternative financing needs and new business models in the Financial Sector Blueprint 2022-2026 (FSB3) which was unveiled recently.

Public Investment Bank Bhd said structural changes are inevitable as businesses today try to survive with increased digitalisation.

“This period of resource allocation could be fraught with challenges and uncertainties, but will enable organisations to be more efficient,” it said in a research note. “The financial sector has been called upon to facilitate this transition, with BNM playing a pivotal supporting role.’’

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz launched the blueprint.

In his foreword, Zafrul said the launch of the FSB3 “is timely” as Malaysia embarks on a new level of growth post-pandemic, underpinned by a robust financial sector that is capable of navigating the oncoming challenges and capturing new opportunities.

With a greater global focus on climate change, the FSB3 will also facilitate the country’s transition towards a greener and more climate-resilient economy.

The research house said much has been achieved by Malaysia in a relatively short period.

In terms of financial inclusion, sub-districts with a population of at least 2,000 people with access to financial services have increased to 96 per cent (2011: 46 per cent).

Ninety-nine per cent of the population living in sub-districts now have access to financial services versus 82 per cent in 2011, while 96 per cent of customers have deposit accounts compared to 87 per cent in 2011, the research note said.

Globally, Malaysia now commands an 18.4 per cent market share of total Islamic financial assets as of 2020.

At home, Islamic banking now makes up 41 per cent of total system financing compared to 22.7 per cent in 2010 with takaful business making up 18.2 per cent of total net premiums/contributions (2010: 12.6 per cent).

‘’The rapid evolution of the global financial landscape, advancements in technology, coupled with potential shifts in global supply chain linkages suggests that the financial sector could possibly look very different yet again by 2026.

‘’Partnerships and collaborations have resulted in notable progress, with growth seen in digital payments as a result of collaboration between banks, e-commerce platforms, e-wallet players, and PayNet,’’ the research house said, adding that private-public partnerships feature prominently in FSB3, more so in the context of digitalisation.

Public Investment Bank believes despite short term volatilities, the eventual normalisation of rates in 2022 and expected economic recoveries will bring about asset quality improvements and loan growth.

‘’We do not see conditions getting significantly worse than 2020/2021,” the house said, adding that it is maintaining a neutral view on the banking sector with a positive bias given its lagging valuations relative to the broader market.

Meanwhile, AmInvestment Bank Bhd is maintaining an “overweight” stance on the sector. AmInvest Research said the interest rate uptrend will benefit the underlying net interest margins of banks. There will be  lower provisions for loan losses as new applications for financial assistance tapers off while overseas operations in Indonesia, Thailand, and Singapore stabilise.

Key targets to be achieved by 2026 under the blueprint includes narrowing the gap between Malaysia’s financial literacy scores and the average score of the Organisation for Economic Co-operation and Development (OECD) members; increasing e-payment per capita at the compound annual growth rate of more than 15 per cent; achieving an insurance/takaful penetration rate of 4.8–5.0 per cent of the GDP and achieving faster, cheaper and more accessible cross-border payments.

The central bank will work closely with the government to review the taxation framework to encourage the growth of alternative finance.

For insurance and takaful, solutions like trade credit protection and specialised products to manage risks in emerging growth areas such as renewable energy projects will be offered to mitigate the risk of finance providers and firms.

On Islamic finance, the focus will be to continue deepening Malaysia’s financial and capital markets.



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