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Islamic Finance ( In Malaysia )Amirul Haji MohamadQGC 080001Halalfinancing.blogspot.comPenny Siew Bee ChewQGC080005
Outline1.  Development2.  Facts and Figures3.  Type of Contracts4.  Examples of Accounts   ( Balance Sheet & Income Statem...
Development -1                                                     Milestones1969                            1983         ...
Development -2                           In General•   LEGAL:    Islamic Banking Act 1983     Malaysia Government Investme...
GUIDELINES :Some Examples
Malaysia’s Parallel          Dual Financial System              Conventional banks                    Islamic banks       ...
Some Differences       CONVENTIONAL                        ISLAMICInterest-based                Interest-freePrimarily ...
Facts and Figures             Increasing                 Increasing                          Increasing                   ...
Facts and Figures                              Latest Update                               ( Dec 2008 )Islamic Banking Ins...
Facts and Figures
Facts and Figures
Facts and Figures
Facts and Figures
Some Information(Islamic Capital Market )
Basis For Usury           /Interest Prohibition• ISLAM  – Quran ( Al-Baqarah,verse 275)• CHRISTIANITY - Old Testament - Ro...
Islamic Banking                             Concepts•   Al-Murabahah (cost plus sales)           •   Al-Mudharabah (Truste...
Type of Contracts                1. Deposits• Al-Wadiah ( Guarantee Custody )• Al-Mudharabah ( Trustee Profit Sharing )• Q...
Type of Contracts                 2. Financing•   BBA ( Deferred Installment Sales)•   AITAB ( Hire Purchases )•   Mudhara...
Islamic ACCOUNTING STANDARDS                                Regulatory Body:                                    (AAOIFI)  ...
Regulatory Body:   (AAOIFI)
AAOIFI
Case Study:Evolution of Accounting       Standards  *EON Bank Berhad*
Balance Sheet & Income Statement          2005 & 2007
Balance Sheet    2007
Balance Sheet               2005Consolidated           Note of FS                           *FS = Financial Statement
Income Statement             2007Consolidated         Note of FS                           *FS = Financial Statement
Income Statement             2005Consolidated         Note of FS                          *FS = Financial Statement
Income Statement   2005 ( Cont’ )
Some Tips                    for Malaysian SMEs  Type of Contracts        Islamic Finance           Conventional          ...
Conclusions• Profit Sharing Concept ensure Win-Win  Situation• Sales Transactions ensure price stability• Asset –Backed Fi...
Thank YOU
Development -1Islamic Banking/Islamic Finance, Islamic Bond and Money                         Market            (Pilgrimsa...
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Islamic Finance in MALAYSIA - INTRODUCTION & DEVELOPMENT, 2009

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Presentation by Amirul HM & Penny Siew at the Asia-Europe Institute - University of Malaya for "Financial & Accounting Ratios for SMEs" subject, IMSME Programme. 2009.

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Islamic Finance in MALAYSIA - INTRODUCTION & DEVELOPMENT, 2009

  1. 1. Islamic Finance ( In Malaysia )Amirul Haji MohamadQGC 080001Halalfinancing.blogspot.comPenny Siew Bee ChewQGC080005
  2. 2. Outline1. Development2. Facts and Figures3. Type of Contracts4. Examples of Accounts ( Balance Sheet & Income Statement )5. Some Tips for Malaysian SMEs6. Conclusion
  3. 3. Development -1 Milestones1969 1983 1993 2003 Pilgrimage Fund Board Full-fledged Bank Islam Bank Muamalat Foreign Islamic Islamic banks Malaysia Bhd. Malaysia Bhd. banks Conventional banks offer Islamic window Islamic subsidiary Islamic Stock Broking Takaful Syarikat Takaful Takaful Nasional, Mayban Takaful, Takaful Operators Malaysia Bhd. Iklhas, Commerce Takaful source : BNM
  4. 4. Development -2 In General• LEGAL: Islamic Banking Act 1983 Malaysia Government Investment Act 1983 Takaful Act 1984 BNM Guide Line Securities Commission Act 1993• EDUCATION : UIA –Islamic University INCEIF – Islamic Finance University• GOVERNMENT :Taxation Incentives• INSURANCES: Takaful ( Islamic Insurances )
  5. 5. GUIDELINES :Some Examples
  6. 6. Malaysia’s Parallel Dual Financial System Conventional banks Islamic banks Conventional banks window Conventional Islamic Banking banks Subsidiaries Insurance Companies Takaful OperatorsConventional financial system Islamic financial system source : BNM
  7. 7. Some Differences CONVENTIONAL ISLAMICInterest-based Interest-freePrimarily debt financing Primarily equity financing & sales transactions Debt financing is interest-  Financing must be “ASSET- based and DOES NOT require BACKED” assetsDerivatives are PERMITTED Derivatives are NOT permitted
  8. 8. Facts and Figures Increasing Increasing Increasing source : BNM
  9. 9. Facts and Figures Latest Update ( Dec 2008 )Islamic Banking Institutions : RM MillionTotal Assets 192,810.40 ( End of Dec 08 ) 13%Total Financing 104,647.60 ( End of Dec 08 ) 14%Total Deposits 154,880.90 ( End of Dec 08 ) 14.25% source : BNM
  10. 10. Facts and Figures
  11. 11. Facts and Figures
  12. 12. Facts and Figures
  13. 13. Facts and Figures
  14. 14. Some Information(Islamic Capital Market )
  15. 15. Basis For Usury /Interest Prohibition• ISLAM – Quran ( Al-Baqarah,verse 275)• CHRISTIANITY - Old Testament - Roman Catholic -Pope Clement Clement V (1311)
  16. 16. Islamic Banking Concepts• Al-Murabahah (cost plus sales) • Al-Mudharabah (Trustee profit-sharing)• Al-Wadiah Yad Dhamanah (savings • Al-Musyarakah (Joint venture profit with guarantee) sharing)• Bai’ al-Dayn (debt trading) Al-Qardhul • Bai’ Bithaman Ajil (Deferred payment Hassan (benevolent loan) sale)• Bai’ as-Salam (future delivery) • Al-Ijarah Thumma al-Bai’• Bai’ Al-Istijrar (supply contract)• Al-Kafalah (guarantee) (Leasing and subsequently purchase)• Ar-Rahnu (collateralised borrowing) • Al-Ijarah (Leasing)• Al-Wakalah (nominating another person to act)• Al-Hiwalah (remittance)• As-Sarf (foreign exchange)• Al-Ujr (fee)• Al-Hibah (gift)
  17. 17. Type of Contracts 1. Deposits• Al-Wadiah ( Guarantee Custody )• Al-Mudharabah ( Trustee Profit Sharing )• QARDHUL – Hassan ( Benevolent loan/ Deposit )
  18. 18. Type of Contracts 2. Financing• BBA ( Deferred Installment Sales)• AITAB ( Hire Purchases )• Mudharabah ( Trustee Profit Sharing )• Musyarakah ( Joint Venture Profit Sharing )• Ijarah ( Leasing )• Sukuk ( Syndication / “Bond”)• Murabaha (Cost Plus Sales )
  19. 19. Islamic ACCOUNTING STANDARDS Regulatory Body: (AAOIFI) Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Registered 1991 ( Agreement signed by Islamic Financial Institutions in 1990 at Algeria ) Based in Bahrain An Islamic international autonomous non-profit corporate body that prepares: accounting, auditing, governance, ethics and Sharia standards for Islamic financial institutions and the industry.
  20. 20. Regulatory Body: (AAOIFI)
  21. 21. AAOIFI
  22. 22. Case Study:Evolution of Accounting Standards *EON Bank Berhad*
  23. 23. Balance Sheet & Income Statement 2005 & 2007
  24. 24. Balance Sheet 2007
  25. 25. Balance Sheet 2005Consolidated Note of FS *FS = Financial Statement
  26. 26. Income Statement 2007Consolidated Note of FS *FS = Financial Statement
  27. 27. Income Statement 2005Consolidated Note of FS *FS = Financial Statement
  28. 28. Income Statement 2005 ( Cont’ )
  29. 29. Some Tips for Malaysian SMEs Type of Contracts Islamic Finance Conventional 1. DEPOSITSCurrent Accounts (CA) *Dividend Paid No DividendAMGIA / Fixed Deposit Early Withdrawal Early Withdrawal (FD) (Pro-rate Dividend) (NO Pro-rate Dividend) 2.FINANCING Late payment *Compensation for Late Late Payment Charges Payment (CLP) (LPC) Joint Venture Available N/A Letters of Credit *Flat Rate LPC / Credit Cards Administration Fee
  30. 30. Conclusions• Profit Sharing Concept ensure Win-Win Situation• Sales Transactions ensure price stability• Asset –Backed Financing ensure less speculation.• Islamic Finance is NOT ONLY for Muslim / Muslim Countries but is for EVERYBODY
  31. 31. Thank YOU
  32. 32. Development -1Islamic Banking/Islamic Finance, Islamic Bond and Money Market (Pilgrimsage Fund Board) source : BNM , Conference on Islamic Banking , Central Bank of UAE , Abu Dhabi

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