‘The Role and Expectations of the Financial Sector in Meeting National Aspirations’

I am honoured to be here today to officiate the ASEAN Chartered Economic Summit (ACES) Economic Dialogue 2030. The theme of this inaugural summit, ‘Malaysia’s Economy towards 2030: Strategic Priorities in a Changing Global Landscape’, is both timely and relevant. The Malaysian economy stands at a pivotal juncture, and the policy decisions that we make today will shape not only the pace of our economic growth but also its quality and durability in the years ahead.

In 2025, Malaysia delivered a commendable economic performance. Despite ongoing global economic uncertainties, Malaysia’s GDP performance exceeded expectations^[1] and grew by 5.2%, supported by broad-based expansion across most sectors, particularly services, manufacturing and construction. Headline inflation also remained low and stable, averaging at 1.4%, while the ringgit exchange rate appreciated against the US dollar and currencies of Malaysia’s key trading partners. This momentum has continued into 2026 with a year-to-date appreciation of 2.93% against the US dollar (as at 5 March 2026). These developments reflect underlying resilience. Indeed, this resilience will enable us to weather the uncertainties surrounding global developments, including the ongoing conflict in the Middle East, and risks to growth from a position of strength. As policymakers, we recognise that we continuously need to strengthen our resilience. While we are fairly optimistic about our growth and investment prospects for this year, a nation’s economic strength is not measured solely by the speed of growth. Sustainable economic prosperity depends on the substance of what we produce, the productivity we generate and the resilience we build.

As Malaysia transitions into the next phase of economic maturity, our economic policies must consider the structural realities that will shape, and in some instances, present challenges to our future growth potential. These include a slowing expansion of our workforce due to an ageing society. Malaysia’s working-age population has plateaued at around ~70% and is expected to decline steadily as the old-age dependency ratio gradually rises from its current level of about 11%. At the same time, rapid technological advancements are constantly reshaping global production networks. Ongoing geopolitical realignments will also have imminent implications for global economic structures. Furthermore, mounting climate pressures will inevitably shape future economic risks and opportunities, necessitating stronger adaptation measures and more climate-resilient growth strategies.

Looking ahead to 2030, the 13th Malaysia Plan (RMK13) will serve as our blueprint for national development. It provides the guide for where resources should be focused over the next 5 years. RMK13 is anchored to four strategic pillars: (1) advancing economic complexity, (2) enhancing social mobility, (3) accelerating the implementation of public sector reforms, and (4) strengthening the well-being of the rakyat and environmental sustainability. Allow me to emphasise the first pillar, advancing economic complexity, which is critical for Malaysia to move confidently into equity-led, high-value, technology- and innovation-driven economic activities. Experience from economies such as South Korea, Taiwan and China shows that growth performance and sustained prosperity depend not only on participation in global value chains, but on building domestic technological capabilities and stronger ownership of key productive assets. This goes to the heart of the ‘Made by Malaysia’ ambition that the Government is putting forward. A starting point for this agenda is productivity. Meaningful productivity gains require capital to be channelled into productive assets, capacity building, technology adoption, research and innovation. Beyond this, they also require strengthening of capital ownership by Malaysian firms across value chains. This will reinforce income retention, improve our balance of payments, rebuild our external and financial buffers, and enhance resilience against external shocks. In today’s volatile and uncertain environment, these have become economic imperatives for us.

Overall, RMK13 is estimated to cost a total of RM611 billion. This is where finance plays a core catalytic role in shaping economic outcomes, where capital flows and economic activity follow. While public finance is important, we are grounded in the reality that fiscal resources are limited. As such, the role of private sector finance will be critical to ensure that key investments can be undertaken to generate the intended long-tail effects on the Malaysian economy. As RMK13 is envisioned to set the foundation for renewed and reimagined economic pathways, private sector financing will also need to undergo purposeful rethinking and repositioning. The banking system, a primary intermediary of finance, will be central to this.

In the words of renowned economist and Nobel laureate Joseph E. Stiglitz, “Well-functioning financial systems do a very good job of selecting the most productive recipients for capital and ensuring that they are using them in high-return activities”.^[2] While this speaks to the effectiveness of the market in allocating resources, we must also recognise that the ways in which capital is mobilised and allocated will determine whether structural transformation accelerates or remains stagnant. To this end, BNM is committed to ensuring that the financial sector is well-positioned to support the evolving needs of an increasingly complex domestic economy. Important areas for consideration include enhanced risk-sharing mechanisms, strengthening institutional capacity to assess long-term strategic opportunities and risks, and improving access to finance for underserved demographics. 

As a starting point, BNM is undertaking a comprehensive exercise to better understand and rethink how Malaysian businesses are banked. Our aim is to facilitate realignment in financing practices and financial services that will strengthen businesses’ capacity to compete and innovate. Typically, the focus of past policy discussions has been on SMEs and smaller-sized businesses, which were seen as requiring support to ensure that their financing needs can be met. Meanwhile, larger businesses were generally expected to already have established financing channels. To an extent, this still holds true. More recently, we have observed that as the Malaysian economy transitions toward more complex and higher-value activities, the financial needs of businesses are also shifting. Loan sizes are increasing. Investment horizons are lengthening. Businesses are operating in a more globally integrated environment, which requires more flexible financing terms. Without appropriate access at home, domestic businesses will seek external financing support. This necessitates the domestic banking system to step up to remain competitive. Over the last decade (2014 to 2025), while the share of bank financing^[3] to SMEs remained stable around 18%, the share to larger businesses moderated from 22% to 18%. Notably, this lower bank share for large businesses has not necessarily been offset by greater reliance on the domestic capital market. 

To secure a financing landscape that is truly forward-looking and inclusive, a shift in financing practices is necessary. Traditional collateral-based models have served the system well. However, existing banking models must evolve beyond traditional collateral-based models. Assessing bankability will require broader consideration of business models, cash flow prospects and innovation capacity. We must act now before the costs from missed opportunities become entrenched.

Just yesterday, BNM launched the Financing Sectoral Engagement (FSE) Forum to help close the knowledge gap between banks and corporates in priority sectors by strengthening industry knowledge and mutual understanding of sector-specific financing needs and opportunities. The forum is also a platform for banks to work together to explore practical solutions to address the financing challenges faced by businesses. Importantly, the insights drawn from these engagements will help inform the next phase of BNM’s banking sector development strategy to ensure that the financial sector continues to serve as a catalyst in advancing economic complexity.

Complementing these efforts, Islamic finance – now a significant pillar of our financial system, comprising 48% of the banking system and 64% of the capital market – is well-positioned to support the nation’s shift toward a value creation economy under RMK13. Malaysia’s universal banking model for Islamic finance extends beyond traditional credit intermediation to include investment-based financing and the mobilisation of philanthropic capital through instruments such as waqf, zakat and sadaqah. These features enable broader capital mobilisation channels for national priorities. Moreover, risk-sharing and equity-based structures, such as Musharakah and Mudarabah, are also well aligned with the needs of high-value, technology-intensive sectors. These sectors typically see returns materialise over longer horizons and therefore require more flexible, partnership-driven funding models. Malaysia’s matured sukuk industry is also primed to mobilise long-term capital for mega-scale infrastructure that enables economic growth – from rail networks that enhance resource mobility, to power generation plants that support industrial expansion, as well as aviation infrastructure that underpins travel, tourism and logistics. 

Lastly, in building an economy that can shift confidently into higher-value and more complex activities, closing protection gaps is necessary. Without adequate protection, individuals and businesses face vulnerabilities that can hinder investment, innovation and long-term growth. Under the broad ambit of addressing protection gaps, specialised risks such as Marine, Aviation and Transit (MAT) and Protection and Indemnity (P&I) have an outsized role in enabling the tradable sectors, including logistics and other offshore operations. To facilitate more coordinated solutions, a Protection Gaps Joint Taskforce has been established by BNM with the insurance and takaful industry as a collaborative platform for collective action. Strengthening the capacity of our domestic insurance and takaful players to be able to provide the necessary protection to these highly technical sectors will contribute significantly towards ensuring that Malaysia’s economic ambitions are supported by robust and internationally aligned risk-transfer solutions.

BNM is currently formulating the next Financial Sector Blueprint (FSBP) for 2027. The areas that I have mentioned today offer a glimpse into some of the strategies that we are carefully considering. As we develop this blueprint, we are guided by the aspiration to build a financial system that is future-ready and deeply attuned to the needs of a more dynamic, complex and opportunity-rich Malaysian economy. As our economy advances, so too must our financial sector; not only to merely finance growth, but to finance transformation. The task before us is not to abandon prudence, but to refine it. Not to compromise stability, but to reinforce it with adaptability. In this regard, I hope the reflections and insights shared will serve as meaningful inputs for the ACES 2030 policy note to help illuminate new pathways through which the financial sector can catalyse our national development agenda. John Maynard Keynes once observed that “the difficulty lies, not in the new ideas, but in escaping from the old ones”. This is the challenge before us. We look forward to receiving your recommendations. With that, it is my honour to officially open the ACES Economic Dialogue 2030.

Bank Negara Malaysia
7 March 2026

[1] GDP forecast range for 2025 was initially 4.0% to 4.8%.

[2] ‘The Role of the Financial System in Development’, Speech at the 4^th Annual Bank Conference on Development in Latin America and the Caribbean, 29 June 1998

[3] Share of bank financing to households has increased from 61% to 63% during the same period