Bank Negara Malaysia seeks to strengthen processes of Islamic financial institutions via new policy document on hajah and darurah

28 February 2024

On 3 January 2024, Bank Negara Malaysia (“BNM”) issued a policy document on hajah and darurah. The policy document clarifies parameters on hajah (needs) and darurah (dire necessity) to facilitate contemporary application in Islamic financial business in accordance with Shariah principles. 

The policy document notes that hajah and darurah concepts have been applied in Islamic financial business to address hardship or difficulties in executing financial transactions or arrangements based on Shariah principles. The application of hajah and darurah arises during unfavourable circumstances or distress situations facing Islamic financial institutions (“IFIs”) to prevent harm (mafsadah) and ultimately attain benefit (maslahah). 

With the issuance of the policy document, BNM seeks to strengthen the current methodology and processes of IFIs in addressing hardship while offering Islamic financial business so as to ensure compliance with BNM’s expectations for the application of hajah and darurah.