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Tapping into islamic finance for non muslims
 

Tapping into islamic finance for non muslims

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Islamic Banking is growing, however there is a misconception that it is meant for Muslims only. The fact is, it is meant for all and this presentation should help in understanding the concept and ...

Islamic Banking is growing, however there is a misconception that it is meant for Muslims only. The fact is, it is meant for all and this presentation should help in understanding the concept and services to serve both Muslims and Non Muslims.

Copyright : RM Applications Sdn Bhd (www.rma.com.my)

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    Tapping into islamic finance for non muslims Tapping into islamic finance for non muslims Presentation Transcript

    • Tapping into Islamic Financing Banking on Faith Based Products By Lokesh Gupta Head, Business & Technology Consulting By RM Applications Sdn. Bhd. No.69-1 Medan Setia 1 Bukit Damansara 50490 Kuala Lumpur Tel: +603-20932677 Fax: +603-20932607 Website : www.rma.com.myStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 1
    • Points to Share 1-. Islamic Banking Overview 2-. Benefits & Advantages 3-. Islamic Banking Evolution 4-. Islamic Banking for Non Muslims 5-. Critical Factors for Islamic Banking Acceptance 6-. Islamic Financing & WelfareStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 2
    • What is Islamic Banking ?Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 3
    • What is Islamic Banking? Isamic Banking is based on the principles of ‘Trade and Commerce’Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 4
    • Islamic Banking Principles Riba Free Isamic BankingStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 5
    • Benefits & Advantages Ethical and Equitable Based on Shariah Based Principles rather Manmade Banking Principles It promotes risk sharing between provider of capital Risk Ownership (investor) and the user of funds (entrepreneur). In the modern Islamic banking system, it has become one Zakat (Religious Tax) of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre The Islamic banks can only charge 1% on the outstanding Penalty installment in the event of default It gives due importance to the public interest. Its ultimate Social Welfare aim is to ensure growth with equity. The Islamic banks give greater emphasis on the Economic Development economic development project rather profitability as sole evaluation criteriaStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 6
    • Benefits & Advantages There is no room for compounding of profit in Islamic Fixed Repayment Banking The contracts are structured in a manner that the liability Transparency is fixed and is known to customer Islamic Banking is not limited to Muslims and it is for Non Banking for All Muslims as well Each Islamic Bank has Shariah Supervisory Board to Strict Governance ensure that all business activities are in line with Shariah requirement and BNM Statutory RequirementStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 7
    • Evolution of Islamic BankingStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 8
    • Evolution of Islamic Finance in Malaysia − Wadiah Saving − Mudharabah Investment − Wadiah Current − BBA Financing Phase I - 1983 − Islamic Interbank Money Mkt − Trade Financing − Murabahah Working Capital − Asset Securitization (Mudharabah) Phase 2 - 1993 − Istisna Financing − Ijarah / AITAB − Bai Innah Financing − Islamic Bonds / PDS − Rahnu Phase 3 - 1998 − Bai al Dayn − Qardh Hassan − Musharakah − Mudharabah Financing − Diminishing Musharakah − Commodity Murabaha Current Stage − Bai Salam − IstijrarStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 9
    • Evolution of Islamic Deposit Products in Malaysia Islamic Deposit Products – Retail & Corporate Saving Account - i Current Account - i Investment Account -i Wadiah Yad Dhamanah Wadiah Yad Dhamanah Mudharabah Mutlaqah (Trustee With Guarantee) (Trustee With Guarantee) (Unrestricted Investment) Mudharabah Mudharabah (Profit Mudharabah (Profit Muqayyadah (Restricted Sharing) Sharing) Investment) Qardh (Benevolent Loan) Qardh (Benevolent Loan) Source : www.bankislam.com.my / www.muamalat.com.my / www.kfh.com.my / www.ambg.com.my / www.rhbislamicbank.com.my / www.bnm.gov.myStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 10
    • Evolution of Islamic Financing Products in Malaysia Islamic Financing Products - Retail House Auto Personal Islamic Pawn Financing - i Financing - i Financing - i Card - i Broking-i Bai Bithaman Bai Innah (Sale Bai Innah + AITAB (Lease to Ajil (Deferred with immediate Qardh Ar-Rahnu Purchase ) Payment Sale) repurchase) Hassan Diminishing Bai Bithaman Bai Bithaman Musharakah + Ajil (Deferred Ajil (Deferred Qard Ijarah Payment Sale) Payment Sale) Istisna (Purchase Bai Bithaman Order) Ajil (Deferred Murabahah Payment Sale) (Cost Plus Sale) Source : www.bankislam.com.my / www.muamalat.com.my / www.kfh.com.my / www.ambg.com.my / www.rhbislamicbank.com.my / www.bnm.gov.myStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 11
    • Evolution of Islamic Financing Products in Malaysia Islamic Financing Products – Corporate Project Working Capital Asset Financing - i Trade Finance - i Financing - i Financing - i Al Istisna Musharakah Murabahah (Cost (Purchase Ijarah (Leasing) (Partnership) Plus Sale) Order) Diminishing Bai Bithaman Mudharabah Musharakah Ajil (Deferred Wakalah (Agency) (Profit Sharing) Payment Sale) Mudharabah Murabahah (Profit Sharing) AITAB (Lease to Bai Dayn (Debt (Cost Plus Sale) Purchase ) Trading) Murabahah (Cost Plus Sale) Al Istisna Kafalah (Purchase (Guarantee) Order) Source : www.bankislam.com.my / www.muamalat.com.my / www.kfh.com.my / www.ambg.com.my / www.rhbislamicbank.com.my / www.bnm.gov.myStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 12
    • Key Statistics Average Growth Rate in Islamic Financing is +12.3%, Source : www.bnm.gov.my / BNM Annual Report 2006Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 13
    • Interest of Non Muslims in Islamic Financing Interest is not only prohibited in Islam but is also Prohibition of Interest mentioned in Jewish Torah and Christian Bible Repayment price is fixed and there is no element of Fixed Repayment compounding profit is involved In the event of default, Penalty is limited to 1% of the Penalty outstanding installment NOT on the total outstanding amount Non Muslims equate Islamic Finance with Ethical Living Ethical Living and doesn’t want to get involved in anything they perceive as unethical Islamic Banks product range is No less then their Product & Service conventional counterpart and it offers a choice to the Portfolio customers Islam recognizes money as a mean of exchange and not Transparency as a commodity, where there should be a price for its useStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 14
    • Interest of Non Muslims in Islamic Financing Non-Muslims fed up with punitive interest payments are Debt Burden more attracted to a system that imposes ethical practices For a Business / Individual loan, the bank is not just the financier but a co-owner of the business and has an Profit Sharing interest in its success as if they have equity. Bank also shares the Loss based on equity proportion Certainty Islamic financing is a preferred hedging device due to its certainty “In Malaysia up to “London has “The Central Bank of 25% of Islamic become a major Malaysia sees non-Muslim accounts are opened trading centre for investment as the key to by non-Muslims” Islamic funds” further market growth” Source : www.bnm.gov.my / www.ethicalcorp.com / http://news.bbc.co.ukStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 15
    • Success Factor to Encourage Acceptance of Islamic Financing Stress on Ethical Marketing Create Awareness via branding and promotion Offer convenience and easy access to information and banking online via e- channels for SME & Corporate via Cash Management, EIPP etc. Introduce Sophisticated Islamic products & services such as Wealth Management, Halal Supply Chain Financing etc Returns from Islamic instruments vs. conventional products Standardization of Terms / Contracts Transformation of traditional client service model for Islamic banks Key drivers will be Innovation NOT Migration, infrastructure and regulatory improvement. Islamic Financing product with stress on economic development e.g. MicrofinanceStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 16
    • Success Factor to Encourage Acceptance of Islamic Financing To Fuel the Growth Islamic Banks will have to offer: Variety and diversified options to Customers Quality services to match the desired expectation of the investors/customers. Professionalism in dealing with investors. Investors with adequate, timely and accurate information to support in their decision making. Competitive structures, pricing and choice of funds. Adequate distribution channels.Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 17
    • Islamic Financing & Welfare Interest Free Economy – Socio Economic Justice Interest retards social and infrastructural development of a nation. The more the debt is paid, the more it increases. Interest is sure gain without any possibility of loss, a reward without work; it contributes to inflation and unemployment. Ethical & Moral Dimension Strong ethical and moral dimensions of doing the business and selecting the activities/commodities to be financed by Islamic Banks are playing an important role in promoting socially desirable investment and better individual/corporate behaviour Justice & Fairness Islamic model is that it is based on profit sharing principle, whereby the risk is share by the bank and the customer. This just system of financial intermediation will contribute to a more equitable distribution of income and wealth.Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 18
    • Islamic Financing & Welfare Spirit of Cooperation & Brotherhood Islam encourages that every man should give the needy a specified proportion of his wealth. This contribution is called as Zakat, a levey on certain categories if wealth. The principle of zakat is to take from those who have wealth and give it away to those who do not. This rotation of wealth is a way to balance social inequality. Islamic Financing is Banking for All !!!Strictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 19
    • Thank You lokesh@rma.com.myStrictly Confidential Visit us at www.rma.com.my  RM Applications Sdn. Bhd. 20