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.
Under
Shari`ah, interest on bank accounts is
(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.
Launching
Pad
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.”
Opening
Doors
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
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.
