The interest in developing Islamic fintech in Malaysia and the efforts in achieving it are constantly on the rise. Several startups have launched Shariah-compliant fintech solutions. Shariah advisory boards at regulatory and industry levels have discussed various Shariah issues related to fintech. Resolutions and exposure drafts have been issued or modified by regulators to cover a wide range of Islamic fintech activities. Some government agencies have established dedicated departments to support fintech and the Islamic digital economy. Universities and training centres have started offering specialized courses and programmes to provide the requisite human capital, while research centres have invested in substantial efforts to push the industry forward by conducting extensive research and providing consultancy services. This report documents a representative sample of such efforts.

Micro, small and medium-sized enterprises (MSMEs) play a pivotal role in driving economic growth, fostering innovation, and providing employment opportunities globally. According to the World Economic Forum (2021), MSMEs represent about 90 per cent of business establishments globally and contribute up to 70 per cent of both employment and global gross domestic product (GDP), accentuating their role as the backbone in many economies. As the global economy transitions towards more sustainable and responsible business practices, and environmental, social, and governance (ESG) factors become increasingly scrutinised, MSMEs are presented with both opportunities and challenges to align their operations with sustainability practices and ESG requirements. Yet, most of the existing sustainability assessment frameworks tend to cater for the needs of large corporations. Realising this gap, INCEIF University - in collaboration with Ficus Capital - has developed the Shari'ah-compliant ESG (ESG-i) Assessment Framework to assess sustainability practices among MSMEs in Malaysia. The ESG-i Assessment Framework serves as a starting point for MSMEs in understanding complex sustainability frameworks and taxonomies that are incongruent with their operational reality. By incorporating Shari'ah principles and embracing the Quadruple Bottom Line (QBL) concept - Planet, People, Profit, and Principle - the framework provides a comprehensive blueprint for evaluating sustainability practices among MSMEs. In contrast to the existing frameworks, the ESG-i Assessment Framework simplifies the criteria for evaluating sustainability practices among MSMEs and provides them with an assessment tool for them to comprehend and integrate into their businesses, regardless of their size and scale. The journey of developing the ESG-i Assessment Framework transcends theoretical constructs to achieve practical efficacy. The pilot phase, featuring a diverse set of MSMEs, not only demonstrates its real-world viability but also emphasises the need for a targeted approach in supporting MSMEs on their journey towards a Low Carbon, Circular and Resilient (LCCR) future. This aligns with the current strategic initiatives taken by many financial institutions and regulatory supervisory authorities driving transition finance. Building upon insights from the pilot phase and feedback from different stakeholders - regulators, practitioners, Shari'ah scholars, and academicians, the ESG-i Assessment Framework has undergone comprehensive enhancements. Aligned with the prevailing domestic ESG guidelines, taxonomies, and assessment framework (e.g., Securities Commission Malaysia (SC)'s Principles-Based Sustainable and Responsible Investment Taxonomy for the Malaysian Capital Market (SRI Taxonomy); Sustainable and Responsible Investment Sukuk Framework; Maqasid Al-Shariah Guidance Islamic Capital Market (Maqasid Guidance); Bank Negara Malaysia (BNM)'s Climate Change and Principle-Based Taxonomy (CCPT), Value-Based Intermediation (VBI); and SME Corporation Malaysia (SME Corp. Malaysia)'s PKS Lestari), as well as international sustainability assessment frameworks (e.g., B Impact Assessment by B Corporations (B Corp), ESG Score by Refinitiv, and standards issued by Global Reporting Initiative (GRI)), the ESG-i Assessment Framework provides a simplified tool developed in recognition of the reality of MSMEs' operations and capabilities. Hence, it serves as a transitional framework for them to embrace sustainability practices. It not only provides an assessment tool but also acts as a bridge to carry MSMEs through the evolving labyrinth that the global sustainability landscape represents. The ESG-i Assessment Framework beckons to be a catalyst for change and champions a more sustainable supply chain for MSMEs. The ESG-i Assessment Framework is increasingly crucial as the European Union's Carbon Border Adjustment Mechanism is set to take effect in 2024, bringing about substantial implications for the Malaysian economy, particularly impacting MSMEs, which contribute over 16 per cent to the country's exports. Economic Forum (2021). MSMEs represent about 90 percent of business establishments globally and contribute up to 70 percent of both employment and global gross domestic product (GDP), accentuating their roles as the backbone in many economies.

A robust financial sector is paramount for a nation's prosperity, especially for developing countries like Malaysia, where efficient investments are the key driver of economic growth. Financial development affects a nation's environment via wealth and technical effects (Khan et al., 2022). Specifically, it boosts the availability of funds in the economy, enhancing access to capital for businesses and individuals and stimulating economic growth. This increased business and household incomes often lead to increased purchases of automobiles and mechanical appliances that consume more energy, thereby increasing carbon emissions, referred to as the wealth effect. On the flip side, better access to finance enables businesses to invest in environment-friendly technologies at lower costs. This improved energy efficiency reduces greenhouse gas emissions, ultimately promoting environmental quality, known as the technical effect. As nations worldwide passionately strive to achieve the Sustainable Development Goals (SDGs), the interplay between financial development and environmental sustainability becomes increasingly crucial for us. This is particularly true for Malaysia, a dynamic economy that endeavours to attain high-income nation status in 2025 and a net-zero emissions target by 2050. In this context, this article aims to illuminate an intriguing issue: can Malaysia's rapidly growing Islamic finance industry promote economic development while mitigating climate impact?

The objective of this study is to examine the impact of the U.S. subprime crisis on the long-term and short-term dynamic relationships between selected Asia-Pacific Islamic stock markets and conventional stock markets in the region. The comovements among these stock markets are examined through cointegration tests, and vector error correction model-based Granger causality tests, for the period from February 2006 to December 2010. The study reveals that, after the debut of the U.S. subprime crisis, Asia-Pacific Islamic stock markets increasingly integrated among themselves and with their conventional counterparts. In addition, the conventional markets of the United States and Japan significantly influence the short-run fluctuations of Asia-Pacific Islamic and conventional markets.

During the last two decades, the phenomenon of financial contagion has been investigated in numerous pieces of research. In spite of its severe implications for the stability of domestic financial systems as well as potential diversification benefits of international portfolio investment, there has yet to be universally agreed conclusion on the relevance of financial contagion. Thus, our current study has been designed to apply the meta-analysis approach to investigate the statistical significance of financial contagion based on past empirical contagion studies. Our meta-analysis concludes that financial contagion is a significant phenomenon. As implications, policy makers should establish contingent credit lines to ensure the liquidity of financial market during the turbulence time, and portfolio investors should diversify away from the potentially contagious markets. It is suggested that future contagion-based meta-analysis may include contagion studies with different methodologies, as well as meta-regression analysis to provide more insights on the sources of variability in the contagion studies.