These initiatives could help Malaysia remain a regional Islamic banking hub

New human capital development programmes will complement existing ones.

According to Bank Negara Malaysia, the certifications of chartered Islamic banker and chartered Takaful practitioner will be launched by the Chartered Institute of Islamic Finance Professionals, a professional body in charge of setting standards for Islamic finance practitioners. BMI Research notes that these qualifications will be the equivalent of chartered banker qualifications under conventional banking and are designed to meet the growing demand for qualified professionals in the sector.

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We believe that this will be positive for the further development of the sector and will complement the Educator's Manual on Shariah Standard Murabahah, which the central bank introduced in 2016.

The Educator's Manual summarises the principles, pillars, and components of Murabahah (non-interest bearing loans, that are typically used when purchasing household appliances, cars, and houses), including best practices for integrating Islamic banking standards with details on operational requirements.

According to BNM, this approach will provide greater transparency for the shariah rulings by the Shariah Advisory Council (SAC) and provide a common point of reference for both shariah scholars and industry practitioners. The Educator's Manual will also provide the basis for the syllabus on Islamic finance in local Malaysian universities.

The training of chartered Islamic banking practitioners will be positive for the training of human capital in Malaysia and provide further tailwinds to the development of the Islamic banking sector. We note that a skills mismatch between tertiary graduates and the demand of the industry has led to lower levels of human capital, limiting efforts to expand the sector.

Furthermore, the central bank's move to strengthen oversight in the banking sector by requiring all bank reports to be signed by a chartered banker (effective 2021) is likely to result in increased demand for skilled labour. We also expect the commitment to strengthen its human capital to help Malaysia maintain its position as a regional Islamic banking hub, with the higher quality of human capital providing it with an advantage over rival Indonesia.