Value-based Intermediation Financing and Investment Impact Assessment Framework Guidance Document

The Value-Based Intermediation VBI commitment is guided by the principles outlined in the Strategy Paper and further elaborated in the Implementation Guide for VBI. While VBI is not a new concept, it differs from initiatives such as Environmental, Social and Governance ESG, Ethical Finance, and Sustainable, Responsible, Impact Financing SRI in that it relies on Shariah to determine its values, moral compass, and priorities.

Implementing VBI requires a comprehensive review of the existing business environment, going beyond current Shariah compliance practices to develop new policies and systems that enhance the value proposition of Shariah.

The implementation of VBI begins with the formation of the Corporate Value Intent CVI, which articulates the Islamic financial institution’s IFI VBI commitment. The CVI forms the basis for developing policies and systems across all functions, from the front office to the back office, including customer service, marketing, product development, risk management, treasury, compliance, finance, human resources, and information technology.

IFIs must re-align their current risk assessment and management systems to reflect the VBI commitment. A VBI-based management system establishes an overarching framework defining guiding principles and requirements to operationalize the VBI strategy, identify, measure, monitor, mitigate, and report risk exposures dynamically and continuously. Establishing an effective management system that aligns with the nature and scale of the IFI’s VBI implementation strategy is critical to the success of its VBI commitment.

This document outlines the framework to facilitate the establishment of an effective risk management system for financing, related advisory services, and investment activities that incorporate VBI considerations.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking