Islamic Banking

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What is Islamic banking? Islamic banking in Malaysia Observing Shariah principles Shariah concepts in Islamic banking Frequently asked questions Glossary

This booklet tells you about the basic concepts and principles of Islamic banking.

What is Islamic banking?
Islamic banking is banking based on Islamic law (Shariah). It follows the Shariah, called fiqh muamalat (Islamic rules on transactions). The rules and practices of fiqh muamalat came from the Quran and the Sunnah, and other secondary sources of Islamic law such as opinions collectively agreed among Shariah scholars (ijma’), analogy (qiyas) and personal reasoning (ijtihad).

Islamic banking in Malaysia
• The first Islamic bank was established in Malaysia in 1983. • In 1993, commercial banks, merchant banks and finance companies begun to offer Islamic banking products and services under the Islamic Banking Scheme (IBS banks). • The IBS banks have to separate the funds and activities of the Islamic banking transactions from the nonIslamic banking business (conventional banking). • You can identify an Islamic bank or an IBS bank from the logo below:

1 bankinginfo

info perbankan

Observing Shariah principles
All Islamic banks and IBS banks have set up Shariah Committees to guide them on Shariah matters and to make sure that they function in a manner that is in line with the Shariah. In addition, the advice of the Shariah Advisory Council which is the highest Shariah body set up at Bank Negara Malaysia, can be sought to ensure uniformity in views and practices. The members of the Shariah Committees and the Shariah Advisory Council are academicians and Shariah experts in Islamic banking and finance.

Shariah concepts in Islamic banking
The common Shariah concepts are as follows: Wadiah (Safekeeping) Wadiah means custody or safekeeping. In a Wadiah arrangement, you will…...

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