PETALING JAYA: Bank Negara Malaysia (BNM) is seeking to broaden the use of Syariah contracts in Islamic finance, encouraging financial institutions to explore alternative financing structures to better support economic activities and evolving customer needs.

In a strategy paper issued on Nov 3, the central bank outlined three priorities: modernising the Syariah contract framework, enabling more diverse applications of contracts and recalibrating the role of tawarruq.

Tawarruq is an Islamic financing arrangement involving the buying and selling of commodities to facilitate cash financing. It remains widely used in Malaysia due to its practicality and broad applicability.

BNM said tawarruq would continue to serve genuine market needs, particularly where suitable alternatives are unavailable or impractical. However, financial institutions should consider other Syariah contracts where these can deliver meaningful value.