Islamic Banking History

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Islamic banking emerged in the 1980s was a Bank Islam. Islamic Bank is the first Islamic bank established in Malaysia. Bank Islam Malaysia Berhad was established on 1 July 1983 under Companies Act 1965. Since establishment, it has become a symbol of Islamic banking in Malaysia and its vision of a "Global Leader in Islamic banking" describes the Bank's status as a leader in the financial services industry in the country ("industry"). The existence of Islamic Banking Act 1983 (IBA), which came into force on 7 April 1983 is the legal basis for the existence of the first Islamic bank in Malaysia. Islamic Banking Act provides authority to the Bank Negara Malaysia with the power
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(Zukri Samat, nd). Islamic Bank has offered an alternative to conventional banking products and services, such as providing various credit facilities, trade finance, deposit taking, providing secure and maintain facilities and funds transfer based on Shariah or Islamic principles. For a 10 years period of time, Bank Islam Malaysia Berhad (BIMB) can operate without competition. This means that the Islamic bank is a bank that is allowed to offer Islamic banking products. (Ruzina Markon, 2009). Within 10 years the establishment of BIMB, no second Islamic bank in Malaysia was established. In addition, in 10 years of the establishment from 1983-1993, BIMB has achieved an average annual growth rate of 48%. This shows BIMB successfully to protect the growth and development of their bank when the total assets doubled from $ 170.7 million at the end of 1983 to $ 369.8 million at the end of 1984, with sharp increases of deposits from $ 91.0 million to $ 274.9 million, and of loans from $ 40.7 million to $ 249.8 million. (Sudin Haron, 2000), It shows the development of the Islamic bank after a year of incorporation. The establishment of Bank Islam Malaysia Berhad (BIMB) is the beginning or…show more content…
Through this scheme, the conventional banking institutions were allowed to provide and offer Islamic banking products and services using existing infrastructure, including staff and branches. The existing commercial banks, finance companies, merchant bank and discount houses was allowed to offer Islamic banking product and services using their existing infrastructure and branches. Malaysia is the first country who offer dual banking system through existing Islamic banking scheme. (Mohamed Ridza Abdullah, 2011). As we known, before it, banking institution in Malaysia only offer conventional product and service. Banking institution which offer Islamic Banking Subsidiaries (IBS) are required to separate between their activities and funds for Islamic banking transaction and their funds and activities for conventional transaction. Next the establishment of The National Shariah Advisory Council in Bank Negara Malaysia was established in 1994. In 1998, The second Islamic bank establish in 1998 which known as Bank Muamalat Malaysia Berhad (BIMB) with the merging of the Islamic banking assets of Bank Bumiputra, Bank Commerce and Bank

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