• MAHAD ABDIWALI MOHAMED International Islamic University Malaysia
  • ABDULLAHI HASSAN OMAR International Islamic University Malaysia
  • HUSSEIN MOHAMUD AHMED International Islamic University Malaysia


Islamic Banks, Value-based Intermediation, Bank Negara Malaysia, Malaysia


The Islamic banking sector in Malaysia is setting up the way for a new era of growth. Due to the rapid growth, Islamic banking practices must adapt to changing market conditions and public demand for high-quality services. However, for Islamic banking to have a lasting influence, it must not just serve clients but also investors, stakeholders, and the environment. One of these projects, Value-Based Intermediation, is established by Bank Negara Malaysia as an initiative. Therefore, this study examines the Value Based Intermediation initiative in Malaysia's Islamic banking industry, focusing on its impact, issues and challenges, and current practices. This study will employ library research to investigate the pattern of Value-Based Intermediation in more detail. The study evaluated the effectiveness of VBI practices using the BNM's VBI strategy paper's four underlying thrusts. In addition, we sampled four Islamic banks, which are CoP members and follow value-based intermediation guidelines. As a result, it is anticipated that implementing Value-Based Intermediation in Malaysia's financial sector would have a variety of positive impacts on industry players and stakeholders in general. This paper also highlights issues and constraints for the industry, which can turn into opportunities for the players with appropriate strategies. Finally, this paper contributes to the body of knowledge; it suggests that the VBI Initiatives be included in all the Islamic banks in Malaysia, as well as an effort by the Islamic finance sector to have a quantitative measurement of the VBI and be prepared annual VBI Report.