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Philosophy and Fundamentals of Sharī’ah for Islamic Finance
SHA0011

Phase 4 Liberalisation

The integration of local Islamic bank with international
Islamic banks began in 2003 when three foreign
Islamic Banks have been granted a license by Bank
Negara Malaysia to undertake Islamic Banking business.
The banks were:

• Kuwait Finance House (KFH) which commenced
operations on 17 February 2006. In fact, KFH was
the first foreign Islamic bank to be licensed by
the Ministry of Finance.

• Al-Rajhi Bank set up its first overseas operations
in Malaysia in October 2006.

• Asian Finance Bank Berhad (AFB) was incorporated
on 28 November 2005 and backed by a consortium
of shareholders, from leading Middle Eastern
financial institutions; such as Qatar Islamic Bank
and associates (70%), RUSD Investment Bank
Inc of Saudi Arabia (20%) and Global Investment
House of Kuwait (10%). Its first branch was opened
on 19 January 2007.

The liberal and open approach of Islamic banking sector
is likely to promote increased competitiveness,
resilience and sustainability of the Islamic financial
system as a financial intermediation. It will also
contribute towards facilitating greater cross border
flows, in terms of increased trade and investment
transactions. This will give greater benefit to the
customers as users of Islamic financial products and
services.

As of January 2008, there are twelve Islamic banks
under the Islamic Banking Act 1983 and twelve IBS
banks offering Islamic banking products and services
in Malaysia. Of the IBS banks, eight are commercial
banks and four investment banks. Five development
financial institutions offer Islamic banking services.

The Islamic finance industry is expected to continuously
expand in parallel with the conventional counterparts.
By 2010, Malaysia expects the Islamic banking and
finance industry will constitute 20% of the overall
banking and insurance market.