More works needed to encourage value-based intermediation adoption

EPF is leading by example and hopes the effect will trickle down from the bigger industry players to the smaller ones


More engagement should be done with public-listed and smaller-cap companies on the adoption of value-based intermediation (VBI), said Employees Provident Fund’s (EPF) Equity Research head Nor Azam Yahya.

He said the adoption of VBI is more than integrated financial reporting, and therefore, requires further clarification of issues.

“The EPF is leading by example and we hope that through this, the trickle-down effect will begin from the bigger industry players to the smaller ones,” he said at a VBI forum in Kuala Lumpur yesterday.

Mohd Zabidi Md Nor

Mohd Zabidi says islamic FIs should develop a process to aid and fund smaller companies to ride on the function (Pic By Muhd Amin Naharul/TMR)

Bank Negara Malaysia’s (BNM) Islamic banking and takaful director Mohd Zabidi Md Nor said Islamic financial institutions (FIs) should develop a process to aid and fund smaller companies to ride on the function.

“The VBI is an overarching guide-line, which means there are many different standards which give equal weight to economic value creation and ethical values. VBI is not part of corporate social responsibility, but is embedded into the business done by the players,” he said.

Mohd Zabidi also added that BNM has been developing a scorecard to measure the adoption of the VBI initiative alongside Islamic banking players, which will be revealed at the Global Islamic Finance Forum 2018.

“We are in the middle of developing the scorecard with the help of the VBI Community of Practitioners (COP). It is important that we have the input of the practitioners so that the scorecard stays practical and achievable.

“VBI is very much a game changer in Islamic finance as it gives equal weight to both economic value creation and upholding ethical values,” he said.

The central bank also announced the strategy paper to adopting the initiative in July last year.

Also present during the forum was Standard Chartered Bank (Singapore) Ltd environmental and social risk management director Samantha Bramley.

She said instead of creating strict guidelines to adopt the VBI, a company should begin internally.

“By creating a set of VBI-compliant ethics and practices in the company, you naturally begin to adopt the initiative itself,” she said.

The “VBI at the core of sustainable banking” forum was organised by Standard Chartered Saadiq Bhd for attendees to discuss the issues that may be faced by the country’s finance industry players in adopting VBI.

The initiative shares similarities with ethical finance, ESG (environmental, social and corporate governance) and SRI (sustainable, responsible, impact investing) with the Shariah aspect as its distinguishing factor.

Currently, nine Islamic banking institutions have formed the VBI COP in Malaysia — namely Bank Islam Malaysia Bhd, Bank Muamalat Malaysia Bhd, CIMB Islamic Bank Bhd, Agrobank, HSBC Amanah Bhd, Maybank Islamic Bhd, AmBank Islamic Bhd, Alliance Islamic Bank Bhd and Standard Chartered Saadiq.

Bank Muamalat is the first banking institution in South-East Asia recognised as a Global Alliance for Banking on Values (GABV) member, which is a network that drives towards sustainable economic, social and environmental development.