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Philosophy and Fundamentals of Sharī’ah for Islamic Finance
SHA0011

Bank Islam Malaysia Berhad

The formal set-up of Islamic bank as a Sharī’ah-based
financial intermediary in Malaysia came into existence
when the National Economic Congress in 1980 passed
a resolution for the government to allow Tabung Haji
to establish an Islamic bank in Malaysia. The initiative
was partly influenced by the global movement to develop
alternative banking system serving the needs of the
Muslims to comply with Sharī’ah principles.

This aspiration led to the establishment of the first
Islamic bank, Bank Islam Malaysia Berhad (BIMB)
which commenced operations on 1 July 1983. The
establishment of Islamic banks was made possible
with the passing of the Islamic Banking Act (IBA),
which came into effect on 7 April 1983. The IBA empowers
the Central Bank of Malaysia (BNM) to supervise and
regulate Islamic banks, similar to the case of other
licensed banks.

In the same year, the Government Investment Act 1983
was also enacted to empower the Government of Malaysia
to issue Government Investment Issue (GII), a
sovereign security instrument to manage liquidity of the
newly established Islamic bank which is issued based
on Sharī’ah principles. With the issuance of GIl, the Islamic
bank could invest to meet the prescribed liquidity
requirements as well as to invest their surplus funds.
The GII also enables BIMB to procure assets in the absence
of assets sourced on its own.

Phase 2 Islamic Windows

Interest-Free Banking Scheme / Islamic Banking Scheme

Malaysia has always known to adopt a ‘gradualist’
approach in the development of its Islamic banking.

As such, the Government, with the major role played
by the Central Bank has adopted a step-by-step approach
to achieve the objectives, in order to spread the virtues
of Islamic banking on a nation-wide basis, with many
possible players and to be able to reach all Malaysians. This
has led to the development of the second phase of
Islamic banking evidenced by the establishment of Islamic
windows, which commenced ten years after the
establishment of Bank Islam.