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MANAGEMENT
DISCUSSION & ANAlYSIS

Demand is growing for ESG-related

Emergence of Challenger Banks investment assets such as green
bonds and there is a high degree of
Shariah-compliant challenger, or digital-only, banks have begun complementarity between Islamic and
to emerge, particularly in the UK, posing a threat to traditional
Islamic banks in their non-core markets. These new banks offer a ESG investing. This is making Islamic
lifestyle-focused banking experience for more than 3 million Muslims financial products increasingly
residents in the UK. Two Shariah-compliant challenger banks were attractive to investors who are
INTEGRATED ANNUAL REPORT 2020 Malaysia and Kenya. Halal robo-advisory Wahed Invest and the newly presence in both Islamic funds and
launched in the UK early in 2020 – Rizq and the mobile-only Niyah.
not Muslim. Malaysia is a leading
Four more digital banks are currently in the pipeline, based in the UK,
ESG investment and has seen several
launched gold trading platform Minted have also announced plans to
initiatives in this space.
establish Shariah compliant digital banks as soon as the first quarter
of 2021. However, these would be deposit taking-only operations
More Shariah-ESG funds are likely to
supplementing their core investment businesses, with no plans to
provide loans in the future.
be launched in coming years, in line
with growing issuance of green and
Similarly, the Saudi Arabian Monetary Authority (“SAMA”) issued
66 licensing guidelines for digital-only banks early in 2020, including sustainable Sukuk. In addition,
conditions that they should be set up as locally incorporated the global economic slowdown
joint-stock companies and maintain a physical presence in the caused by COVID-19 will lead to
kingdom. It has been reported that two entities have applied for
BIMB HOLDINGS BERHAD 199701008362 (423858-X) arm of Gulf International Bank, which mainly operates online while institutions to tackle issues such as
greater numbers of social instruments
a digital banking license with the regulator. The only bank to date
being launched by Islamic financial
with a digital presence in Saudi Arabia is Meem, the Islamic banking
mass unemployment. The pandemic
leveraging its physical presence.
could be a turning point for the
In Malaysia, BNM issued on 31 December 2020 the much anticipated
asset management industry as many
digital banking framework, joining a growing number of countries in
businesses are betting on sustainability
Asia who are each introducing their own version of a digital banking
to tackle the challenges it is presenting.
framework.
Further Innovation in the Islamic Capital Markets

The pandemic has served as an impetus for instruments specifically
ring-fenced to mitigate the health and economic impact of the
coronavirus and aid recovery. To this end, issuance by the Islamic
Development Bank (“IsDB”) of sustainability Sukuk to tackle the
effects of the pandemic in its member countries has set a stellar
example. The proceeds will be exclusively deployed by IsDB towards
social projects under its Sustainable Finance Framework, with a focus BIMB Investment Management
on ‘access to essential services’ and ‘SME financing and employment Bhd (“BIMB Investment”) launched
generation’ categories under the umbrellas of ‘UNSDG-3: Good its Global Shariah-ESG Equity fund
Health and Well-Being’ and ‘UNSDG-8: Decent Work and Economic for retail investors in October 2019.
Growth’ for its 57-member countries.
BIMB Investment also in April 2020
There is also an opportunity for the reemergence of certain strong launched its BEST Invest robo-
Islamic instruments, such as zakat and waqf, which could once again intelligence app to help investors
play a role in reducing the impact on the most vulnerable segments build their portfolios, offering a
of the population or on poor countries. This would not only be in range of Islamic and sustainable
line with the ultimate goals of Shariah but also create a new growth unit trust funds.
channel for the industry.