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FINANCE
@ Halal | March-April. 2026
The evolution
continues
• Islamic banking is gaining wider acceptance across demographics, yet its
long-term value lies in strengthening risksharing as a core differentiator.
• Operational and structural barriers continue to hinder risk-sharing adoption
and keep debt-based instruments dominant in the current landscape.
• Stable sukuk ratings alongside an upgraded outlook reflect strong
fundamentals and improving market
confidence in the MNRB Holdings Bhd.
MALAYSIA’ S Islamic banking sector continues to gain momentum, supported by strong demand and widening acceptance across diverse segments of society. Once primarily associated with Muslim consumers, shariah-compliant financial products are now attracting broader interest and reflect a shift in how ethical and alternative financing models are perceived.
According to Bank Mualamat Malaysia Bhd Chief Economist Mohd Afzanizam Abdul Rashid, the sector’ s
steady expansion is underpinned by both demographic factors and increasing confidence among non-Muslim users. These demands have contributed to the rising role of Islamic finance within Malaysia’ s overall banking system.
Recent figures highlight this trajectory, as Islamic banking assets have reached RM1.3 trillion, accounting for 34.3 per cent as of January 2026. This marks a substantial increase from just RM152.9 billion, or 13.7 per cent of banking assets, in 2007, signalling the sector’ s transformation into a key pillar of the national financial landscape.
Mohd Afzanizam pointed out that for Islamic banking to deliver its full value, greater emphasis must be placed on risksharing models. These structures, such as musyarakah, involve banks sharing business risks with entrepreneurs, offering a more partnership-based approach compared to traditional lending.
At present, debt-based structures continue to dominate, and tawarruq-based financing alone accounts for a significant share of total financing activities.
Strengthening risk-sharing mechanisms could encourage entrepreneurship and create a more balanced financial ecosystem, where risks and rewards are distributed more equitably.
However, transitioning toward such models presents structural challenges. Islamic banks rely heavily on deposit-based funding, which customers expect to yield stable, predictable returns. This creates a mismatch with risk-sharing instruments, which inherently involve greater uncertainty. Additionally, these models often require greater capital commitments, making them less cost-effective.
Operational hurdles also persist. Many smaller businesses lack comprehensive financial records, further complicating risk assessments. At the same time, there is a skills gap within the industry, as banking professionals are more accustomed to conventional credit evaluation methods than equity-style partnerships.
Meanwhile, CIMB Islamic Chief Executive Officer, Ahmad Shahriman Mohd Shariff, emphasised that competition from conventional and digital banks should not be viewed negatively. Instead, he described the evolving landscape as an opportunity for innovation and shared learning, which would ultimately benefit customers.
Beyond banking, Malaysia’ s leadership in Islamic finance is further emphasised by its strong capital market. The country continues to hold the largest share of the global sukuk market, solidifying its influence in attracting international investment flows.
Afzanizam added,“ Malaysia possess the largest suku market, which accounts for 36 per cent market share at the end of 2024. Therefore, the numbers really stand out for Islamic finance.”
As Malaysia maintains its leadership in the global sukuk market, the next phase of Islamic banking may depend on how effectively it embraces its foundational principles. Moving beyond debt-based models and advancing risk-sharing could define how the industry continues to evolve while delivering meaningful value to society.
RETHINKING ISLAMIC FINANCE: Industry players highlight the need for banks to adopt the risk-sharing concept in the Islamic banking landscape to unlock long-term industry potential.
MNRB ratings affirmed
MNRB Holdings Bhd has strengthened its standing in the financial market following a series of reaffirmed credit ratings, alongside an improved outlook that signals growing confidence in its long-term prospects.
The latest assessment by RAM Rating Services Bhd maintained the group’ s existing ratings across multiple sukuk and note programmes, while also upgrading the credit ratings from stable to positive. The move reflects the rating agency’ s view of the group’ s resilience and its ability to sustain performance in a competitive insurance and reinsurance landscape.
Among the key highlights, MNRB’ s RM420 million senior sukuk and subordinated sukuk retained their respective AA3 and A1 ratings. Meanwhile, its RM800 million senior and subordinated mediumterm notes programme, RAM, also had its ratings reaffirmed at AA2 and AA3.
The rating action was underpinned by the strong operational fundamentals of its core subsidiary, Malaysian Reinsurance Bhd, which continues to play a central role in the group’ s performance. As Malaysia’ s leading reinsurer, the company has demonstrated consistent underwriting discipline, supported by effective risk management practices and a solid foothold in the domestic general reinsurance market.
In addition, Malaysian Re’ s insurer financial strength ratings were reaffirmed at AA2 / P1, further reinforcing its reputation as a stable and reliable player within the industry. The unit’ s RM250 million subordinated medium-term note programme also maintained its AA3 rating, reflecting confidence in its financial position.
Beyond reinsurance, MNRB’ s broader portfolio includes its takaful operations under Takaful Ikhlas Family Bhd and Takaful Ikhlas General Bhd. These entities contribute to the group’ s diversified income streams and support its positioning within the Islamic finance ecosystem.
The group’ s healthy reserves coverage was another factor highlighted in the rating review. Strong reserves not only provide a buffer against potential risks but also enable the company to pursue its growth strategies with greater flexibility.
Listed on Bursa Malaysia, MNRB continues to benefit from its established market presence and integrated business model. The positive outlook indicates that the group is well-positioned to capitalise on opportunities across both conventional and takaful segments.
As market conditions evolve, the reaffirmed ratings and improved outlook suggest that MNRB remains on a stable footing, with its disciplined approach and strategic positioning supporting continued growth in the years ahead.-