Islamic Revivalism Movement Towards the Establishment
This meaning is taken from the Quran (22:5). Increase means the increase over capital or nominal amount, the increase being either large or small. According to Islamic law, Riba technically refers to the premium that must be paid by the borrower to the lender along with the principal amount as a condition for an extension in its maturity. Bank Islam Malaysia Berhad (BIMB) was established after the enacting of the Islamic Banking Act (IBA) in 1983, the IBA permitted the establishment of the first Islamic Bank in Malaysia.
BIMB with a paid up capital of RM 100 million and an authorised capital of RM 500 million is carrying out its activities on an interest free basis. The establishment of BIMB is a major step towards an interest-free financial system in Malaysia. This marked the establishment of more Islamic commercial institutions under the new mode of the Islamization Policy. Insurance industry has been in the market for a long time. However, insurance policy does not comply to the teaching of Islam in which the contract and concept of insurance involve elements of riba, gharar (uncertainty) and maysir (gambling).
Islamic Revivalism Movement Towards the Establishment Essay Example
With the emergence of Islamization process in Malaysia, Syarikat Takaful Malaysia Berhad was incorporated on 29 November 1984 as a subsidiary company of BIMB Holdings Berhad. Other major shareholders are the State Islamic Religious Councils / Baitulmals of Terengganu, Pahang, Negeri Sembilan and Amanah Saham Bank Islam (ASBI). The company objectives is to provide takaful services (Islamic Insurance) at the highest standard of efficiency and professionalism to all Muslims and the population in Malaysia.
Malaysia is one of the Muslim countries that is committed in not only developing Islamic banking system but also a complete Islamic financial system. It was the objective of the Malaysian government to develop the Islamic banking system parallel to the conventional system. Instead of establishing many new Islamic banks, the government introduced a concept of ‘Islamic window’ which allows the existing conventional banks to introduce Islamic banking productst of customers.
The concept of Islamic window started in March 1993 when the Central Bank of Malaysia or Bank Negara Malaysia (BNM) introduced the “Interest-Free Banking Scheme”. Twenty-one Islamic financial products were developed to cater for this scheme with only three major banks participated initially. By July of the same year, this scheme was extended to all financial institutions in Malaysia. As at end of 2000, the Islamic banking system was represented by two Islamic banks, 17 domestic commercial banks, five merchant banks and seven discount houses.
There are also four foreign-owned banks providing Islamic banking products and services. The step towards developing a complete Islamic financial system began with the fostering of both Islamic capital market and Islamic money market. The former started when the Malaysian government issued Islamic bonds in 1983. To further enhance the development in the capital market, Islamic private debt securities were introduced. At the end of 2000, a total of RM22,935 private debt securities were issued, out of which RM 6,278 were Islamic bonds (Hassan, 2001).
The establishment of BIMB Securities in 1994, as Malaysia’s first Islamic stockbroker, was the first step towards promoting Islamic equity market. Apart from providing Islamic broking houses and Islamic managed funds, a separate “Islamic Index” was established. This index comprises 179 permissible stocks on the Kuala Lumpur Stock Exchange (New Horizon, 1996). Today, the Islamic banking and Islamic finance is in its boiling point era. An aim of being the global Islamic financial hub has witnesses a lot of effort take by the government to encourage the development of this industry.
Till date, Malaysia remains as the largest issuer of Islamic bond (Sukuk) in the word ahead of the other Middle East countries. In meantime, there are about seventeen (17) full-pledged Islamic banking institutions in Malaysia including those of foreign and subsidiary of parent conventional successful bank. The long-term objective of BNM is to create an Islamic banking system operating on a parallel basis with the conventional banking system. In addition, an Islamic banking system must also reflect the socio-economic values in Islam, and must be Islamic in both substance and form.
The first step to spread the virtues of Islamic banking was to disseminate Islamic banking on a nation-wide basis, with as many players as possible and to be able to reach all Malaysians. The rising of the Islamic financial market as well as its conventional counterpart has made the market becoming sophisticated and complex, thus in line with this development the Securities Commission has been establish in 1997 to monitor and regulate the capital market in Malaysia. The growth of Islamic finance was an alternative for a less costly and less risky financial product to please the demands of the society.
The final phase is covered from 2000 to presentwhereby Islamic finance has developed tremendously and as it now reach its tipping point. During this period we can see a lot more effort taken by the government to strengthen the industry. This phase begins with the formation of Islamic Banking and Finance Department in the Bank Negara Malaysia (BNM) in 2000, and followed by the introduction of 10-year Financial Sector Master Plan in 2001 which among others has put a specific chapter focusing on the development of Islamic banking and finance industry in Malaysia.
Later in 2002, another significant event occurredwitness the birth Islamic Financial Services Board (IFSB) an independent body that focusing on the disclosure and governance of IIFS. In line with it function, it issue guideline and standards for the best practice for the industry as a whole and not limited to Malaysia only. Then, in 2003 BNM has issued Guidelines for Financial Reporting for Licensed Islamic Bank (GP8-i) with the objective to promote onsistency and standardization amongst the Islamic banks in complying with the provisions of the IBA 1983 and approved accounting standards, specifically MASB i-1 and the Shariah requirements. The Guidelines prescribed the minimum requirements of the financial statements that the Islamic banks need to disclose. Malaysia’s Islamic finance industry has been in existence for over 30 years. The enactment of the Islamic Banking Act 1983 enabled the country’s first Islamic Bank to be established and thereafter, with the liberalisation of the Islamic financial system, more Islamic financial institutions have been set up.
Malaysia has a diverse and growing community of domestic and international financial institutions. Malaysia’s diversity of market intermediaries consists of investment banks, local and foreign Islamic banks, takaful operators, brokers and fund managers. They include several foreign owned entities; both conventional institutions who have established Islamic subsidiaries and also entities who are conducting international currency business (ICBU).
Many of these intermediaries have participated in Malaysia’s many notable achievements such as record setting sukuk issuance and other industry firsts. As such, these financial institutions possess a proven track record and in-depth experience. Malaysia’s market intermediaries are also internationally recognised for their innovative capability. This is attributed to their expert use of various Islamic principles or a combination of principles to produce innovative Islamic banking, takaful and Islamic Capital Market (ICM) offerings.