KUALA LUMPUR: Malaysia’s Islamic banking industry remains resilient, supported by strong capital and liquidity positions, amid uncertainties in the Middle East, said the Association of Islamic Banking and Financial Institutions Malaysia (AIBIM).

AIBIM said that while Malaysia’s economic fundamentals remain sound, geopolitical tensions may have indirect spillover effects through higher energy prices, market volatility, and potential disruptions to trade and supply chains.

"These could impact business costs, inflation, and cash flows for certain segments of the economy.

"The Islamic banking industry remains vigilant and ready to respond to these evolving risks," it said in a statement today.

The association said the industry continues to uphold the values of justice, compassion, and social responsibility, while advancing value-based intermediation (VBI) to deliver sustainable and inclusive outcomes.

In 2024, Islamic financial institutions channelled RM148.6 billion into VBI-aligned activities, including support for SMEs, green financing, and social initiatives, reinforcing resilience in key sectors of the economy.

In supporting these efforts, Islamic banks are also advancing initiatives introduced by Bank Negara Malaysia, including the use of risk-sharing instruments such as i-CITA, as well as programmes like iTEKAD Protection.