Islamic Banking

After 23 years of developing and regulating an Islamic Financial system hailed as a progressive model, Malaysia recently announced key measures to enhance inter-linkages in the global islamic financial markets and expand business in its efforts to entrench itself as a global hub for Islamic Finance.

At a recent Malaysian Islamic finance forum, Central Bank Governor Tan Sri Zeti Akhtar Aziz announced the launch of the Malaysia International Islamic Financial Centre (MIFC) which will pave the way for the offering of Islamic financial products and services in international currencies from anywhere in Malaysia.

The MIFC initiatives aim to provide operational flexibility, cost-effectiveness and a conducive environment for Islamic finance business in international currencies, noted Deputy Bank Governor Dato’ Mohd Razif bin Abd Kadir.  At the same time, the liberating measures are clearly intended to augment existing business and to draw new investment.

Notably, existing Islamic banks and takaful or Islamic insurance operators can now set up International Currency Business Units within their institutions to carry out foreign currency transactions. 

New conditional licences will also be issued for the setting up of International Islamic Banks and International Takaful operators, under the Islamic Banking Act and the Takaful Act respectively, to qualified foreign and Malaysian financial institutions who want to offer international currency products and services.

For greater flexibility, offshore Islamic banks and the Islamic divisions of conventional offshore banks are now allowed to open operational offices onshore in Malaysia to conduct non-ringgit business, while maintaining their presence in the Malaysian offshore financial centre of Labuan.

Further tax incentives for the Islamic finance industry are in the pipeline as a sweetener to enhance the country’s competitiveness against rivals like Singapore and Dubai.

Courtesy: ‘Accounting & Business’ - September 2006 - Volume 9 No.8 - Page 6