First Foreign Islamic Bank To Open in Malaysia
The central bank last year granted three licences to foreign banks to operate the Islamic banking in the country.
PETALING JAYA, May 10, 2005 (IslamOnline.net & News Agencies) - The first of three foreign Islamic banks is expected to open its windows in Malaysia by the third quarter of the year, the central bank deputy governor said on Tuesday, May 10.
Bank Negara Malaysia, the central bank, last year granted three licences to Kuwaiti Finance House, Al-Rajhi & Investment Corporation and Consortium of Islamic Financial Institution led by Qatar Islamic Bank to operate the Islamic banking in the country, Bernama reported.
“The three of them have been granted licence and it is up to them to make sure that they have proper infrastructure and set up before starting operation,” Zamani Abdul Ghani told reporters.
He said the opening up of the three banks shows that Malaysia was ahead in liberalisation.
The senior banker said Malaysia now had three full-fledged local Islamic banks, adding that a few more would open up their windows.
, interest on bank accounts is haram
(unlawful) because such interest is an increase of money made without effort or trade.
Islam prohibits depositing one’s wealth and taking specified increase without the risk of either loss or profit making.
Therefore, the type of investment allowed is where a person deposits money in an account and shares both the risk of making profit or losing.
Shari`ah further forbids Muslims from receiving or paying interest on loans.
The senior banker said the three-bank mandate was not only to tap the Malaysian Islamic finances but also the region as well as internationally.
He expected corporations and multilateral institutions to increasingly use Malaysia as a launching pad to raise Shari`ah-compliant long-term capital.
“With the affluence and growing importance of West Asia, investment will be directed from other areas to this area,” he added.
Zamani his government will try to “ensure that the financial infrastructure is well in place and that our banking institutions are well equipped with distinct capabilities to enable Malaysia to compete regionally and internationally as a leading Islamic financial center.”
“This is not merely a national vision, but actually a national target.”
Zamani said allowing a 49 percent stake for foreign investors in investment bank and the setting up of subsidiaries from the windows of commercial banks proved that the country was opening its doors in the financial sector.
He noted that the new foreign Islamic banking players and the transformation of Islamic windows into Islamic subsidiaries of a banking group presented new challenges to the Islamic banking scene where competition was expected to intensify.
The senior banker explained that in line with the government's strategic direction, initiatives are being taken to encourage strong and capable Islamic financial players to venture abroad and explore new markets.
The Islamic financial industry, which began three decades ago, has made substantial growth, drawing continuous attention from investors and bankers.
Growing at an estimated 15 percent annually, the Islamic finance market is currently estimated to be worth more than 300 billion dollars with more than 200 Islamic finance institutions operating.
Hundreds of conventional banks and investment companies, some Western, have established special units
to deal in products compliant with Shari`ah
On Wednesday, March 16, the leading global index provider Dow Jones announced expanding its Islamic market series by adding the Dow Jones-RHB Islamic Malaysia Index.
Lloyds TSB, Britain's fifth-largest bank, became the third bank in the country to offer Shari`ah- compliant mortgage services.
The move came after the bank launched an Islamic bank account, which also offers no interest or overdraft facilities.
In 2003, HSBC banking group became the fist high street bank in Britain to offer mortgages and current accounts in accordance with Shari`ah.
A year later, the Islamic Bank of Britain (IBB) became the first Islamic bank to open its doors in the country.