PETALING JAYA : Bank Negara has launched the first-ever transaction-based Islamic benchmark rate in the world, Malaysia Islamic Overnight Rate (MYOR-i), to spur the development of syariah-compliant financial products.

       Bank Negara collaborated with the Financial Markets Committee and AIBIM-FMAM Islamic Market Technical and Development Committee or IMITDC on the development of MYOR-i.

       MYOR-i replaces the current system, Kuala Lumpur Islamic Reference Rate or KLIRR, which will be discontinued with immediate effect said Bank Negara in a statement.

       The central bank said the introduction of MYOR-i will spur the development of innovative syariah-compliant financial products which will further deepen Malaysia’s Islamic financial market.

       It will also reinforce a holistic syariah-compliant ecosystem and enhance best market practices and standards.

       The statement said the establishment of MYOR-i as the Islamic benchmark rate will be a catalyst in driving Islamic financial product innovation and creating transparency for market players to negotiate and standardise their financial contracts, thus achieving efficient pricing across all financial instruments.

       “This will help to deepen the onshore Islamic financial market and enhance its role in financing real economic activities in Malaysia,” said Bank Negara.

       The policy document on MYOR-i is on Bank Negara’s website with the following several key features and governance standards.

       It says MYOR-i is administered and calculated by Bank Negara. It is a volume-weighted average rate of return on syariah-compliant unsecured overnight ringgit interbank transactions. This includes the bank’s Islamic overnight monetary operations.

       MYOR-i is currently based on the Commodity Murabahah instrument. New syariah-compliant instruments may be included in the future and MYOR-i for every Kuala Lumpur business day will be published on Bank Negara’s website at 12pm on the following business day.