Islamic Banking is now a popular buzzword in Malaysia, with many banking institutions jumping on the bandwagon to offer Islamic banking products and services over the last few years. Islamic banking basically refers to a system of banking that is compliant with Islamic law or better known as Syariah law. Islamic banking revolves around the principal of mutual risk and profit sharing between parties and an assurance for fair business transactions for all consumers.
These principles are supported by Islamic banking’s core values, which strongly encourage entrepreneurship, trade and commerce, which bring benefits to society. However activities such as interest (riba), gambling (maisir) and speculative trading (gharar) are strictly prohibited. Financial institutions have great flexibility in creating new products for Islamic banking based on the concepts of ijarah (leasing), mudharabah (profit sharing) and musharakah (partnership). This financial segment sets higher standards for investments and promotes greater accountability as well as risk mitigation.
Since its debut in the 1970s, Islamic banking has gained much traction in Malaysia and globally. According to a report by Bank Negara Malaysia, current Islamic banking assets and assets under management will reach USD 1 trillion in time to come. There are more than 300 Islamic financial institutions worldwide spread across 75 countries.
Malaysia’s Islamic Banking Act 1983 has acted as a gateway to welcome the first Islamic bank in the country, followed by other established players. As a result of the country’s strong policies, regulatory and legislative foundations, Malaysia has emerged as a fore-runner in the global Islamic financial services industry.
The Borneo Post reported that Islamic finance is now widely accepted by both Muslims and non-Muslims due to continuous awareness programmes and good customer experience. It also stated that one of the challenges faced by the Islamic banking industry in Malaysia is the lack of Islamic bankers with a sound knowledge of Syariah law.
Several Islamic banking learning centres have been set up over the last few years to churn out capable and skilled Islamic bankers to navigate the industry into the future. These include the Islamic Banking and Finance Institute Malaysia (IBFIM) and the International Centre for Education in Islamic Finance (INCEIF) with comprehensive training programmes on Syariah law and banking.
With robust growth rates in the Islamic banking sector, there are great career opportunities to be explored in the field of Syariah lawyers, accountants and bankers, among others. With Malaysia’s excellent potential as an Islamic hub in Asia Pacific, there is much room for growth in the Islamic banking job market. Malaysia is also set to welcome more creative Islamic finance products and services as more investors from the Islamic financial industry look to Malaysia as a potential partner in Islamic finance.