Bank Islam aims to boost green financing by RM800m


BANK Islam Malaysia Bhd aims to expand its green financing book by another RM800 million this year, as the country’s largest Islamic bank is set to increase the segment’s revenue contribution to 20% by 2021 from 14% presently.

CEO Mohd Muazzam Mohamed said the bank is ready to be at the forefront of green financing — a segment which has been earmarked as significant to the bank since 2016.

“For potential green financing, the bank is targeting to increase the segment by RM800 million on bank-wide basis for 2020.

“This is based on the amount of financing in our pipeline,” Mohd Muazzam told The Malaysian Reserve recently.

He said as of last year, the bank’s exposure of green financing portfolio reached RM1.8 billion.

“I am positive that our target growth is achievable,” he added.

Mohd Muazzam said the 20% growth figure set by 2021 would be optimal for the bank and limit its exposure and risks.

“Concentration is a risk. So, I believe to have it at 20% would be a good figure for us,” he said.

According to the CEO, promoting sustainable practices in the country has always been a part of the company’s DNA as the bank’s business model is underpinned by responsible financing and ethical practices.

“Our portfolio in green financing is already high. It’s not something new to us. So, we will continue per usual, but our focus will be on how we approach the market.

“To be honest, I can say that sustainable business practices have always been incorporated since 35 years ago before the term was even coined. Our current portfolio should be a testament of our commitment,” he said.

The bank main partners in providing green financing so far are Malaysia Debt Ventures Bhd, Sustainable Energy Development Authority, Credit Guarantee Corp Malaysia Bhd and Malaysian Green Technology Corp.

Currently, among the industries that have benefitted from the bank’s green financing scheme are renewable energy (RE) (solar and hydro), which accounts for up to 60%-65% of Bank Islam’s green financing portfolio; 25% in green buildings; while the remaining 10% in sustainable waste management.

Mohd Muazzam said the bank’s green financing clients are from the RE sector, but it is looking into financing other industries that incorporates green technologies.

For example, he said Bank Islam is currently working with a subsidiary of Tenaga Nasional Bhd (TNB) to provide personal financing to instal solar panels for house owners in a programme that will be announced in the near term.

In Sarawak, the bank’s Vendor Financing Programme, which aimed to promote and further catalyse the growth of the country’s oil and gas industry, had approved a total of RM420 million as at Jan 31 this year.

Apart from tie-ups with Petroliam Nasional Bhd, the Bank Islam Vendor Financing Programme is also involved in the energy sector via collaborations with TNB and Sarawak Energy Bhd.

Mohd Muazzam said there are challenges in green financing, especially in risk assessments, which have excluded climate change as a factor.

He also added that there is a lack of the ecosystem to support the growth of a viable and sustainable green economy as green initiatives are largely linked to the energy sector.

“Of course, there are awareness issues, especially with regard to business practices that affect environmental issues. As a provider of the fund, we want to support businesses that protect the environment. That’s why we are strict in our due diligence before providing the fund.

“You can say that we are at the forefront of green financing. We have got all the proof and we want to continue this for a long time,” Mohd Muazzam added.