To date, 109 approved projects have received financing worth RM1.5 billion by 22 banks, of which 17 projects are receiving financing worth RM300 million from six Islamic banks . For the first 9 months of 2013, 33 companies received approved financing facilities totaling RM416 million. The  2  BIS central bankers’ speeches  approval rate for the financing has also improved from 54% in December 2012 to 59% in September 2013, reflective of the positive reception of financial institutions towards green technology financing. The recipients of the financing facilities operate in a broad range of green technology sub-sectors that covers energy, buildings, transportation and water and waste management. This financing initiative has also contributed to increasing employment, with the generation of nearly 1,400 jobs. The additional allocation of RM2.0 billion of the GTFS therefore presents an opportunity for financial institutions, including Islamic banks to further expand financing into this new and exciting area of growth. Strong potential for Islamic finance to support green technology This brings me to my next point – the role of Islamic finance in contributing towards a diverse and robust financing ecosystem for green ventures. In the Quran, verses 11 to 14 of Al-Fajr emphasise the need to care for the environment and the forms of life that Allah has created on this earth that includes proper usage of natural resources.
The principles of these contracts can foster the spirit of entrepreneurship and promote due diligence and proper management of funds by the entrepreneur whom will benefit from the Islamic bank’s expertise in profit generation and financial management. The contracts also strengthen the fiduciary duty of Islamic banks as manager of the business venture and help to align its focus on longer term value creation. Islamic banks ought to further explore the possibility of using Mudarabah and Musharakah contracts to finance SMEs involved in green technology. However these contracts carry different sets of risks, therefore, it is important for Islamic banks to build its capacity in terms of talent and risk management capabilities to understand and manage new risks peculiar to the profit and loss sharing contracts. There is a need to adopt strong governance, transparency and disclosure practices to meet the due diligence requirements for determining the viability of business and investment proposals. In Malaysia, the recently enforced Islamic Financial Services Act 2013 is an important milestone in providing an enabling environment to spur more risk-sharing transactions. This new legislation promotes certainty to the legal and regulatory treatment of Islamic financial transactions by providing legal recognition to the contractual requirements in accordance with the Shariah. There will also be issuance of Shariah and operational standards of each Shariah contract that provides greater clarity and transparency, therefore facilitating effective risk and profit sharing activities to take place. We aim to issue the relevant Shariah standards before the end of 2013.