It is my great pleasure to be part of this Islamic Financial Market Committee Roundtable 2026. I welcome all of you to this gathering that offers an excellent platform to deepen our discussions while strengthening our collaboration and trust within the Islamic financial market community.

Introduction: Islamic Finance Milestones

Ladies and gentlemen,

Malaysia has built a strong foundation in Islamic finance, reflected in its ranking in the Islamic Finance Development Indicator (IFDI)^[1] for 13 consecutive years, and Malaysia accounts for approximately 36% of global sukuk outstanding.

Domestically, Islamic finance has become an integral part of the financial system. Islamic financing now represents almost half of total financing within the banking sector, while the Islamic capital market represents about two-third of the capital market. At the same time, the Islamic financial market has attained depth and sophistication, with transactions in Malaysia’s unsecured Islamic interbank market exceeding RM1 trillion in 2025, more than twice the level recorded five years ago. Moreover, as at 30 September 2026, cumulative unsecured Islamic interbank transactions reached RM1.27 trillion, exceeding the RM1.19 trillion recorded in the conventional market, reflecting the depth and relative strength of the Islamic money market.

These advancements are a testament to the long-standing commitment of many stakeholders across the ecosystem, including the ones here. They reflect decades of sustained investment in market infrastructure, regulatory and Shariah frameworks, institutional capabilities, talent development and strong industry collaboration.

Building Tomorrow’s Islamic Financial market – Three shifts for the next chapter

Ladies and gentlemen,

While these achievements provide much to be proud of, they are not the destination. Rather, they provide the foundation upon which the next phase of development must be built.

The more important question today is not how far the market has come, but whether it is equipped for what comes next. As we look ahead, I believe the next chapter of Malaysia's Islamic financial market will be defined by three important shifts.

The first shift; from market size to deeper and broader market participation. Malaysia has built a sizeable and increasingly liquid Islamic financial market. The Malaysian Government Investment Issue (MGII) has grown in prominence over the years and is now broadly comparable to the conventional Malaysian Government Securities (MGS) in both size and liquidity. Outstanding MGII now stood at RM640 billion, representing 47% of total outstanding government securities. Secondary market activity has also expanded significantly.

Nevertheless, there remains substantial opportunity to further deepen the market by broadening participation across a wider spectrum of investors. For instance, foreign holdings of MGII remain relatively modest at only around 8%, compared to 34% for MGS. This suggests an untapped potential to attract a broader pool of international investors into Malaysia's sukuk market. Encouragingly, the signals from global investors remain strong. Malaysia's USD1.5 billion Global Sukuk issuance in July 2026 attracted more than USD9.5 billion in orders and achieved an oversubscription rate of 4.7 times, and more importantly, at record-low spreads of 15 basis points above comparable US Treasury yields for the 5.75-year tranche and 25 basis points for the 10-year tranche. Indeed, market pricing was observed to be 'priced like a AA-rated country', underscoring strong global confidence in Malaysia's economic fundamentals and prospects.

Broadening the investor base across segments requires a market that investors can readily understand, access, price and trade with confidence. It calls for greater transparency, internationally recognised sukuk structures and deeper secondary market liquidity that supports efficient price discovery and trading activity. Recent engagements with Japanese investors, led by the IFMC, revealed growing interest in Malaysia's sukuk market, demonstrating that the foundations are in place to attract participation from international investors.

The second shift; from innovative landmark transactions to scalable market solutions. Malaysia's Islamic financial market has long been recognised for its ability to innovate and pioneer new developments. In recent years, we have witnessed several important milestones that demonstrate both the dynamism of the market and its willingness to embrace new possibilities.

These include Malaysia's first tokenised sukuk, which showcased the potential of distributed ledger technology to enhance market efficiency and accessibility. We also saw Malaysia's first pilot involving the settlement of tokenised sukuk using tokenised deposits.

The market has also continued to advance solutions that deliver meaningful societal impact. The world's first blue sukuk, for example, channelled proceeds towards critical domestic water infrastructure projects, supporting sustainable water resource management and strengthening water security for communities.

These developments signal an important shift from conceptual exploration towards practical implementation, where new ideas are applied to address real market needs and deliver tangible economic and social outcomes. They also reflect the strength of collaboration across the ecosystem, bringing together regulators, financial institutions, market infrastructures and other stakeholders to turn innovative concepts into reality. These are significant achievements and milestones worth celebrating. I would like to take this opportunity to congratulate those who have played a role in driving these initiatives forward and contributing to the continued development of Malaysia's Islamic financial market.

Looking ahead, there remains significant opportunity to build on this strong momentum. As new ideas continue to emerge, our collective next task is to ensure that successful innovations achieve broader adoption and create lasting impact across the market. The first transaction proves possibility, the next requires scale.

We therefore encourage the continued development of innovative Shariah-compliant solutions that address genuine economic needs, create value and importantly, achieve scale. The real impact of these innovations will ultimately depend on their broader adoption, repeat transactions and deeper market participation.

Third shift; from market benchmark to market integrity. A deep and resilient Islamic financial market rests on a foundation of strong market integrity. The strength of a market is determined not only by the products it offers or the transactions it facilitates, but also by the confidence it inspires among market participants. This confidence is reflected in how instruments are priced, how risks are managed, and how market participants value, transact and make decisions across the financial system.

One important initiative in this regard is the introduction of MYOR-i, the world's first transaction-based Islamic benchmark rate. This represents a significant milestone in the development of Malaysia's Islamic financial market. By anchoring pricing to actual Islamic money market transactions, the benchmark rate strengthens transparency and supports greater confidence in the pricing and valuation of Islamic financial instruments.

Recent developments have been encouraging. The issuance of Malaysia's first MYOR-i-referenced sukuk and MYOR-i-referenced Islamic profit rate swap represent important steps forward. These developments demonstrate that market participants are increasingly prepared to incorporate the benchmark into their business activities and inspire further confidence that the transition is gaining momentum across the market.

Importantly, the transition to MYOR-i forms part of broader efforts to further strengthen the integrity and resilience of Malaysia's Islamic financial market. These efforts include enhancing market liquidity, supporting effective market-making activities, strengthening risk management capabilities and fostering a more active secondary market.

The next phase is about achieving broader adoption across financing, sukuk and derivatives instruments. This will require coordinated action across the industry, including system enhancements, product development, documentation readiness, robust fallback arrangements, and wider adoption of the Tahawwut Master Agreement. Success will depend not only on individual institutional readiness, but also on collective commitment across the market ecosystem.

This year's IFMC Roundtable therefore takes place at a particularly important juncture. The industry is moving towards market-wide adoption and readiness ahead of the mandatory transition on 1 July 2027 – yet we know that the success of MYOR-i will not ultimately be measured by the date on which its use becomes mandatory.

Rather, it will be measured by the confidence with which market participants price instruments, execute transactions, hedge risks and manage liquidity using the benchmark in their daily business activities. Because in the end, confidence is at the heart of every well-functioning financial market. And such confidence, underpinned by robust, transparent and credible market benchmarks, is essential to preserving the integrity of Malaysia's Islamic financial market.

Call to action: From Milestones to Market Practice

Ladies and gentlemen,

Malaysia's recent milestones demonstrated that we know how to pioneer innovation. From advancing innovative and sustainable finance solutions, the industry has consistently shown its ability to lead and innovate. These achievements provide a strong foundation for the next phase of development. The opportunity before us now is to move beyond individual success stories and transform promising milestones into common market practices, embedded in the day-to-day activities of issuers, investors, intermediaries and end-users.

After all, markets do not deepen through isolated transactions. Markets deepen when more participants are willing to issue, invest, trade, hedge and provide liquidity. Market developed ultimately through repeated use, growing confidence and widespread participation.

Conclusion

The discussion we have today therefore matters. The decisions we make, the partnerships we forge, and the actions we take collectively will help shape the trajectory of Malaysia's Islamic financial market for decades to come. This is a journey that requires not only vision, but also collaboration and collective commitment.

In this regard, let us be guided by the timeless wisdom of the Qur'an:

'Cooperate with one another in goodness and righteousness, and do not cooperate in sin and transgression.' (Surah Al-Ma'idah, Verse 2)

May this divine command for cooperation continue to guide our efforts as we work together to strengthen Malaysia's Islamic financial market and advance its contribution to sustainable economic and financial development that is blessed by the Almighty. On this note, let the IFMC Roundtable Discussions begin – I wish you all a productive discourse ahead. Thank you.

^[1] By ICD-LSEG Islamic Finance Development Reports