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Datuk Muhammad bin Ibrahim

MALAYSIA - Finance

Paternal Instincts

Governor, Bank Negara Malaysia


Datuk Muhammad bin Ibrahim has been Chairman and Governor at Bank Negara Malaysia since May 5, 2016, serving as the Deputy Governor prior to that. He was earlier the Managing Director of Danamodal Nasional Berhad, a former commissioner of the Securities Commission of Malaysia, and served as a council member of the Malaysian Institute of Accountants (MIA). Datuk Muhammad is a council member of the Malaysian Bankers Institute and an Associate Fellow of the Institute of Bankers Malaysia. He holds a master’s degree from Harvard, an accounting degree from the University of Malaya, and a postgraduate diploma in Islamic banking and finance from the International Islamic University Malaysia.

TBY talks to۬ Datuk Muhammad bin Ibrahim, Governor of Bank Negara Malaysia, on the openness of the Malaysian economy and enhancing growth potential.

Our banking industry is facing the current rapidly changing and challenging economic environment from a position of strength, following the successful reform measures that were implemented. Given the high degree of openness of the Malaysian economy and the increased integration with the international financial system, external developments have continuously affected our domestic economy. But the economy has been able to weather these challenges and have remained on a steady growth path of 4-6% over the past five years.

In recent quarters, economic growth, however, has moderated. This was attributable to a number of external and domestic shocks affecting the economy since late 2014. As we move forward, these shocks will gradually dissipate and growth of the Malaysian economy will improve. Further support is also forthcoming in the form of government measures to increase disposable income, thus, facilitating households and firms’ ongoing adjustments. The assessment is therefore for the economy to grow by 4-4.5% for 2016. Importantly, our financial system remains resilient and supportive of the economy. It is important to recognize the underlying reasons for the resilience of the Malaysia economy. This resiliency has been as a result of the continued strength of our fundamentals and the successful reforms and structural adjustments we have undertaken over the last decade.

Going forward, continuity in Bank Negara Malaysia’s financial sector policies will be preserved. We will continue to strengthen our prudential regulatory framework in line with global standards, while introducing new developmental initiatives and maintaining a strong focus on the fair treatment of financial consumers. Following transformational measures taken in the past few decades to significantly strengthen the financial system, the banking industry in Malaysia is managing this transition from a position of strength. This strong position has been an important element to facilitate orderly adjustments in transitioning towards global standards without disruptions to financial intermediation, thus ensuring the smooth flow of financing to the economy.

To enhance Malaysia’s growth potential, several initiatives had been identified that will help boost productivity, improve the income-earning potential of Malaysians, and expand opportunities in new markets. Building from Malaysia’s leading position as an international Islamic finance center, efforts to promote the sustainable growth of Islamic finance supported by a dynamic ecosystem will create opportunities for high-income employment. Meeting the e-payment targets that Bank Negara has set is also vital to enhance our economic efficiency, competitiveness, and productivity. Bank Negara Malaysia is also taking some measures to support growth in the financial services sector, encourage innovation and strengthen resilience, especially in the field of regional financial integration, fintech development, systemic focus on regulation, governance, and the role of banks in ensuring an inclusive financial system.

Bank Negara will introduce a framework for fintech firms to test innovations in the financial services operational environment. Bank Negara has long recognized the power of technology in driving the financial sector forward. Over the years, banks have harnessed the power of technology to reap significant benefits. Bank Negara has supported this development on many fronts, including in the areas of payments, internet banking, agent banking, Islamic finance and money exchange, and remittances. Fintech will be a new addition to the list.
Because of the profound implication of new technology, we require a re-think of the regulatory framework in addressing consumer protection and market conduct issues as well as the technological impact on the orderly functioning of financial markets. We expect that the framework would enable fintech firms to provide regulated financial services directly to the public, or in partnership with financial institutions, and to operate under more flexible regulatory arrangements.

The bank also expects the framework to deliver a number of key benefits. It will provide regulatory clarity for fintech start-ups and for banks and consumers that use their services. It will also lower barriers to entry and accelerate the time-to-market for productive innovations. Our aim is therefore to support fintech firms that go on to upscale their activities, and aid fintech firms to better anticipate and adjust to appropriate regulatory expectations.



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