SCHOOL OF ECONOMICS, FINANCE AND BANKING (SEFB)

ISLAMIC BUSINESS SCHOOL (IBS)

UNIVERSITI UTARA MALAYSIA (UUM)

SEMESTER SEPTEMBER 2019/2020 (SESSION A191)

BWBS3043 ISLAMIC BANK MANAGEMENT (B)

Group Assignment 2

Islamic Banking in Malaysia

Submitted to:
DR. NASHIRAH ABU BAKAR

By group:

Matric. Student Name

1 253392 ALIDA ALIA BINTI BAHARIN
2 255713 NUR IZZAH ATHIRAH BINTI SUHAIMI

3 256413 NURUL FATIHA NABILA BINTI BORHANODIN

4 259018 NUR TASNEEM BINTI MOHD ZIN

5 272324 NURUL SYAFIQAH BINTI ISHAK

Submission date:
Week 10

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Introduction

Islamic banking is a system that practice Islamic law which follow the Islamic

guideline. It had been implemented in Malaysia since 1963 with the aim to help those

who wanted to perform Hajj. The number of Islamic banking institutions are increasing

from time – to – time and people are started to invest in Islamic banks more than the

conventional banks. In Malaysia, there are 16 banking institutions such as Affin Islamic

Bank Berhad, Bank Islam Malaysia Berhad, Bank Mualamat Malaysia Berhad and

more. Islamic Banking Businesses in Malaysia that is Maybank Islamic Berhad are

regulated by the Islamic Financial Services Act 2013. Islamic Banking are governed by

both the regulatory authorities Bank Negara Malaysia (BNM) and the Security

Commissions (SC).

The important key elements in islamic banking operation are the prohibition of

usury-interest (Riba), prohibition of ambiguity (gharar) and prohibition of

impermissible activities such as gambling, selling of liquor, etc. The objective of

Islamic banking system, as mentioned, is to develop banking products based on Islamic

principles which are to totally eliminate the element of ribā. This means that any

interest-based lending or financing is not allowed.

Islamic Banking began operating as a new Maybank subsidiary known as Maybank

Islamic Berhad (MIB). A wider variety of Islamic products and services will now be

available to customers. This includes financing in foreign currencies and stepping up

efforts to develop and package local and overseas demand for products and services.

Islamic Banking in Malaysia started with the establishment of Lembaga Tabung Haji

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in 1963. Since then, the Central Bank has continuously strengthened regulatory

standards to develop the Islamic Finance market.

1.0 Background of Islamic Bank

Maybank Islamic is a wholly-owned Maybank company that acts as the Maybank

Group's Islamic financing arm. Maybank was the first domestic commercial bank to

offer Islamic finance products and services through its Islamic window operations in

1993 until Maybank Islamic began operations on 1 January 2008 following the transfer

of the Islamic finance business of its parent. It not only became the largest Islamic Bank

in Association of Southeast Asian Nations (ASEAN) with total accumulated assets

which had exceeding approximately 91 billion Ringgit but also become the largest

Islamic Bank in the Asia Pacific region.

Maybank Islamic leverages on Maybank's policies, infrastructure and resources,

including distribution channels, information technology systems and platforms, as well

as front and back office support operations to reap the benefits of economies of scale

and reduce resource duplication. In addition, the products and services of the Bank are

also available in its 16 dedicated branches in Malaysia as well as are colocated at its

parent bank’s more than 400 branches and the various distribution channels nationwide.

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 The Bank dominates the domestic Islamic financing industry with strong market

share which clearly reflects the Maybank Group’s seventeen years of in-depth expertise

in Islamic financial products and services. As at 31 December 2013, Maybank Islamic

is the largest domestic Islamic bank in Malaysia by assets with an asset size of RM125.1

billion

For FYE 2013, financing grew by 40% year-over-year (“y-o-y”) amounting to an

increase of RM24.9 billion, backed by a healthy capital position of RM6.7 billion. The

financing growth was fuelled by the Group’s Community Financial Services (“CFS”)

and Global Banking divisions (“GB”). Financing growth by CFS, comprising

consumer, small medium enterprise and business banking segments, grew 39% y-o-y

or RM18.4 billion while financing distributed by GB rose 45% y-o-y or RM6.5 billion.

Deposits from customers increased RM12.0 billion or 17% y-o-y as both the CFS and

GB portfolios expanded at 28% and 7% totalling RM43.2 billion and RM39.9 billion

respectively.

Besides, Penetration of Maybank Islamic's Shariah compliant products and

services has expanded considerably over the years reflecting healthy acceptance

amongst retail and wholesale customers, as the Bank's offerings meet their needs,

provides additional value and match their financial goals and lifestyles.

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 Maybank Islamic also continued to work with the Maybank Group to provide retail

and institutional investors with Islamic financial solutions. The Bank aims to be the

primary financial services partner for corporate investors as the Bank expands its

leadership across borders by securing key deals in local and foreign currencies, further

contributing to the growth of the bank's economies.

The global growth of the Islamic finance industry is expected to continue on a

strong momentum and Malaysia is well positioned to be at the forefront of the

industry’s development. On the back of the industry’s growth, Maybank’s Group

Islamic Banking is on track to enter a new growth phase through its regionalisation

plans while solidifying its business in the home market. The Bank is optimistic that this

can be accomplished through continued commitment and cooperation across the Group

in line with the ambition of Maybank Islamic to become' the global leader in Islamic

finance by 2015. The Bank is optimistic that this can be accomplished through

continued commitment and cooperation across the Group in line with the ambition of

Maybank Islamic to become' the global leader in Islamic finance by 2015.

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 Maybank Islamic has been awarded several accolades by publications of

international standing for all its achievements in Malaysia as displayed in the following

table;

INSTITUTION AWARDS

Islamic Business & Finance 2013 Best Commercial Bank (Asia)

 Industry Leadership Award – Islamic

Banker of the Year

 Best Islamic Retail Bank & Trade

The Asset Triple A Awards 2013
Finance,

 Malaysia Best Islamic Project Finance

House

World’s Best Islamic Financial Institutions

Global Finance Magazine Awards 2013
2013 (Asia, Malaysia & Singapore)

Alpha Southeast Asia Award 2013 Best Islamic Finance Bank (Malaysia)

International Finance Magazine 2013 Best Islamic Bank (Malaysia)

World’s Best Islamic Financial Institutions

Global Finance Magazine Awards 2012
2012 (Asia & Malaysia)

KLIFF Islamic Finance Awards 2012 Most Outstanding Islamic Investment Bank

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Maybank Islamic also provides a comprehensive range of financial services under

two main business pillars both offering Shariah compliant financial products and

services to cater for the needs of its customers, namely community financial service

(CFS) and global banking (GB). CFS remains the core business segment and major

contributor to Maybank Islamic. As at 31 December 2013, CFS division contributed

approximately 76% of Maybank Islamic’s total financing.

Community Financial Services

Maybank Islamic’s CFS segment includes the following:

Retail:

 Consumer Finance

 Mortgages

 Automobile Financing

 Retail Financing

 Cards, Wealth and Payments

 High Net Worth and Affluent Banking

 SME Banking

 Business Banking

Community financial service (CFS) encompasses three major strategic business units

of the Maybank Group and Maybank Islamic’s retail financing portfolio namely:

Mortgages, Automobile Financing, and Retail Financing. Maybank Islamic’s strong

market presence is made possible by its ability to leverage on the crossselling of its

products and services. In addition, Maybank Islamic is able to reach its domestic

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customer base through the Maybank Group’s extensive branch network and automated

teller machines, Maybank2u.com.my website and Kawanku phone banking, which

enables consumers to perform various transactions over the internet and the phone.

Global Banking

Global banking segment accounted for approximately 24% of Maybank Islamic

financing portfolio as at 31 December 2013. Some of Maybank Islamic’s GB business

units are as follows:-

 Investment Banking

 Global Markets

 Corporate Banking

 Transaction Banking

The client coverage team was also established across these business units to offer

customized, innovative products to clients and to meet these clients’ diverse financial

needs. This coverage model has enhanced the capabilities, sharpened focus and

maximized cross-product collaboration to deliver superior product offerings such as

advisory, treasury, trade finance, cash management as well as financing solutions

2.0 Product Offer by Islamic Bank

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 Maybank Islamic also offer various kind of product and services just like

conventional banks. These product offer by Maybank Islamic can be divide to four

categories that is Islamic Deposit Accounts, Islamic Financing, Islamic Investments,

and Takaful products.

1. Islamic Deposit Accounts

There are several products offered by Maybank Islamic under Islamic Deposit

Accounts. One of the products are Islamic Fixed Deposit-I(IFD-I). IFD-I is a long-term

Islamic deposits are based on Shariah Murabahah Contracts. The assets underlying the

Bank's transactions with customers are based on certain Shariah-compliant

commodities that the Bank deems appropriate.

The tenure for this product is from 1 to 60 months where the profit to be paid on

either monthly or half yearly or upon maturity. This product also beneficial to

customers in term of higher profit rate compared to normal saving account, Free

Personal Accident Takaful Coverage (PATC) plus funeral and medical expenditures,

and this account are accepted as a collateral for banking facilities. This account can be

apply by individual aged 18 years and above, joint account, Business Enterprises,

trustees, association/clubs/societies/organizations, foreigners, professionals, and

Government and Corporate Funds.

Other product offer by Maybank Islamic is Maybank2u Savers-I. Maybank2u

Savers-I is a Shariah compliant online saving account based on Qard (Loan) contract.

It provides the convenience of opening, accessing and closing your account without

visiting the branch and can be use from anywhere in the world via Maybank2u.com.

This product also provides passbookless where the customer can check and view their

monthly account statement up to 3 months, ATM access all over the nationwide such

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as cross under banking ATM under Maybank Group in Singapore, Brunei, Philippines,

Indonesia, and Malaysia, as well as worldwide ATMs via Plus ATM network, and

cashless shopping via Maybankard debit. This product is open to Maybank2u.com users

who is aged 18 years and above with user ID and password access to Maybank2u

secured site and the transaction can be performed via Maybank2u.com, M2u mobile for

smart phone users, ATM services, and Kawanku Phone Banking.

2. Islamic Financing

Under Islamic financing, Maybank Islamic offers 3 main product to customers, that

products are Maybank Islamic Personal Financing-I(MIPF-I), Commodity Murabahah

Term Financing-I(CMTF-I), and Al-Ijarah Thumma Al-Bai(AITAB).

Maybank Islamic Personal Financing-I(MIPF-I) is a fixed monthly installment

with minimum financing amount of RM5,000 and maximum financing amount of

RM100,000. The tenure applicable for this product is minimum2 years to maximum 6

years. The profit rate for this MIPF-I can be seen as below;

Financing Amount Rate (%)

RM5,000 to RM20,000 8% per annum

RM20,001 to RM50,000 7% per annum

RM50,001 to RM100,000 6.5% per annum

The benefits for using this product is the monthly installment payment is low, no

document stamping, no processing fees, and can get fast approval.

The other product offer by Maybank Islamic is Commodity Murabahah Term

Financing-I(CMTF-I). CMTF-i is a Shariah-compliant financing facility that provides

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customers with alternatives to acquire complete or under construction assets such as

real estate , land properties, plant and machinery, ships and commercial vehicles. The

tradable commodities are zinc, tin, lead, palm oil, and wheat and this product eligible

for individual, non-individual, local and foreign customers. For the tenor, as per

existing term financing based on customer’s credibility and requirements. The payment

for the commodities will be paid by bullet or lump sum payment or periodically and

disbursement can be made if there is an agreement terms between bank and customer.

Al-Ijarah Thumma Al-Bai(AITAB) is shariah-compliant car financing. This

financing is based on AITAB which means leased followed with sales. The customers

can made an easy payment of their installment via Maybank branches, ATMs, or online.

This financing provides attractive and competitive term charge, extensive network of

dealers nationwide, renewal of road tax and motor takaful, and fast processing and

approval of the application. The types of goods financed can be divided into three, there

are new motor vehicles, secondhand motor vehicles, and reconditioned motor vehicles.

This financing is open to individuals aged 18 years old and above, sole proprietorship,

partnership, and Private Limited and Public Limited Companies.

3. Islamic Investments

The product offered under Maybank Islamic Investments is Foreign Currency

Mudharabah Deposit and Placement-I(FCM-I). FCM-I is based on mudharabah

contract which means profit sharing where the bank act as entrepreneur and customers

act as provider of fund or capital. It also allows easy transfer transactions overseas

safely with wide network of branches as well as correspondent bank worldwide and the

dividend return is not fixed based on certain rate performance. The profit sharing

between bank and customers are based on upon agreed profit sharing ratio. FCIM-I can

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be considered as an alternative investment in shariah compliant Short Term Foreign

Currency Investment.

This investment is eligible for resident and non-resident, individual and non-

individual, and as well as business banking customers. The currency offered by

Maybank Islamic is US Dollar(USD), European Dollar(EUR), Australian

Dollar(AUD), British Pound(GBP), New Zealand Dollar(NZD), Hong Kong

Dollar(HKD), Canadian Dollar(CAD), Singapore Dollar(SGD), Swiss Franc(CHF),

and Japanese Yen(JPY). As for Non-Interbank FCIM-I for individual, the tenure is from

1 month to 12 months while for Non-Interbank FCIM-I for non-individual, the tenure

is minimum 1 day for USD, 7 days for EUR, AUD, GBP, and 1 month for NZD, HKD,

CAD, SGD, CHF, and JPY.

4. Takaful Products

For Takaful products, Maybank Islamic also offers several products such as

Takaful Hero15, Mortgage Takaful, and Fire Takaful.

As for Takaful Hero15, this product is actually a personal accident plan that takes

into consideration the huge contribution the customers make to their family. This plan

was designed to offer personal accident coverage and support to breadwinner of the

family. Considering the great support he make to his family, at least financially, the

plan ensures that he can always be hero in his family eyes, even if he is not around. The

benefits of Takaful Hero15 is that hassle free enrollment, no medical examination

required, immediate cover from the day of proposal approval by Maybank Islamic

Financial Executive, on the spot certificate issuance, comprehensive protection with

affordable contribution, flexible contribution options, and easy and reliable

contribution mode via auto debit. This product is open to Malaysian citizen or

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permanent resident of Malaysia aged between 18 to 60 years and the certificate renewal

is applicable up to a maximum age of 70, depends on satisfaction level of the customers

state of health.

The other product under Takaful is Mortgage Takaful. Mortgage Takaful is a

shariah compliant long term Takaful plan that provides Bai Bithaman Ajil home

financing borrowers with financing protection in the event of premature death or

permanent disability. The feature of this plan is surplus sharing where sharing of net

surplus from the Takaful operation as long as the customers have not made a claim

during the period of Takaful and the surplus is allocated based on the proportion to the

contribution paid. The customers also was given an option to pay in advance all annual

contributions payable for the duration of their house financing. There also a guaranteed

acceptance for house financing up to RM150,000 and entry ages up to 50 years old for

the next birthday, subject to pre-existing condition with no medical examination is

needed. The scope of protection for this plan is guaranteed benefit to settle customer’s

mortgage balance, wider coverage with liberal permanent disablement definition that

pays out the permanent disablement benefit if the customers not able to perform their

job for a six consecutive months, flexible protection for real estate or real estate under

constructions, and 24 hours coverage anywhere in the world.

Last but not least is Fire Takaful. Fire Takaful is a shariah compliant Takaful

protection plan for the properties that damaged by fire, lightning, or explosion. The

risks covered for this plan including fire, lightning, explosion, riot or strike (malicious

damage), impact damage, aircraft damage, bursting and overflowing of water tank

apparatus or pipes, earthquake and volcanic eruption, storm, tempest, flood, and bush

lalang fire.

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3.0 Financial Performance by Islamic Bank

Financial performance analysis is the process of identifying the financial strengths

and weaknesses of the firm by properly establishing the relationship between the items

of balance sheet and profit and loss account. We decided to calculate the Maybank

Islamic Berhad performance which are using the current ratio, equity ratio, ROA and

ROE in 2017 and 2018:

The Financial Performances of Maybank Islamic in 2017 and 2018.

1. Current ratio,

= Current assets / Current liabilities

Table 1 : Current ratio of Maybank Islamic Berhad in 2017 and 2018

2017 2018
17 374 930 / 183 583 721 33 587 575 / 191 491 447
= 0.0946 = 0.1750

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 Figure 1 : Current Ratio of Maybank Islamic

The current ratio is referred to the ability of a company to meets its short-term

obligations from it’s current assets within next 12 months. Based on the figure, it shows

that the Maybank Islamic Berhad is achieved satisfactory for the both years. In 2018,

the current ratio is higher than 2017. Which is the Maybank Islamic Berhad manage

their current liabilities to fund long term assets. Thus, the Maybank Islamic Berhad has

higher ability to meets the short-term liabilities and has an adequate level of liquid

assets to satisfy the current period’s obligations. This is good for the bank as well as it

can manage to meet the short-term obligations.

2. Equity ratio

= Total shareholders’ equity / Total assets

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 Table 2 : Equity Ratio of Maybank Islamic Berhad in 2017 and 2018

2017 2018

9 311 409 / 202 495 053 8 854 308 / 210 536 957

= 0.0460 = 0.0420

Figure 2 : Equity Ratio of Maybank Islamic

The equity ratio is reflected the ability of shareholder equity to cover all outstanding

debts when the business is in the difficult situation. It also measures the margin of safety

to lenders or creditors in the event of liquidation. Based on the figure show, the ratio in

2017 is higher than in 2018. This means that the Maybank Islamic Berhad has higher

ratio which is has the greater shareholders’ financial commitment. This show that the

commitment of shareholders is important towards the successful business and the bank

need to be more accurate in assessing a stock’s risk exposure. It is because the bank

has a highly leveraged and risky investment.

3.Return on Assets (ROA) and Return On Equity (ROE)

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Table 3 : Return on Assets (ROA) and Return On Equity (ROE) of Maybank Islamic
Berhad in 2017 and 2018
YEAR ROA ROE
= 261,957 / 210,536,957 = 261,957 / 8,854,308
2018
= 0.12% = 2.96%
= 261,957 / 202,495,053 = 261,957 / 9,311,409
2017
= 0.13% = 2.81%

Figure 3 : Return on Assets (ROA) and Return On Equity (ROE) of Maybank

Islamic

In order to evaluate the performance of the bank instituions, one of the method is

using returm on equity (ROE) and return on assets (ROA). ROE is a measure of the rate

return flowing to the bank’s shareholders which it is approximates the net benefit that

the shareholders already received from the investing their capital in the bank that hope

for the earning such a suitable profit while ROA is primarily an indicator of managerial

efficeincy of the bank that converting the institution’s assets into the net earnings.

Based on the table above, the result shows that ROA slightly decrease in 2017 ito

2018 which are 0.13% into 0.12%. A low ROA show that the Maybank Islamic Berhad

indicates that the bank is not able to make maximum use of asset for getting more profit

17
in 2018. While for ROE was slightly increase in 2017 to 2018 and it show the bank

indicates how well a bank’s management is deploying the shareholders’ capital in 2018.

4.0 Challenge Faced by Islamic Bank

Islamic banking has shown tremendous progress since the establishment of the first

Islamic bank which is Bank Islam in 1983 that brings various effects towards the

society, economy and individual itself. Malaysia recorded the fastest growth in Islamic

Finance. The government plays an important role in developing regulation and

infrastructure for the Islamic finance become more dynamic, competitive and

innovative. Malaysia is successfully apply dual banking system which is Islamic and

conventional banking system. The system is complementing each other in the economic

development of the country. But, there are a few challenges and constraints faced by

the Islamic Bank industry in order to secure a promising future in this industry.

Besides, Islamic banking is a banking system that the regulation compliance

with Islamic Law Shari’ah. The rules and practices under Islamic banking are in

agreement with the primary sources of Shari’ah Law, such as Quran and Sunnah.

However, there are joint founded that the development of Islamic banking and financial

institutions in Malaysia is still facing some challenges. They have some challenges

between Islamic banking and conventional because that have same process and system

about Islamic banking. The challenge of Islamic banking is valid after the conventional

banks to make the choice to participate in Islamic banking activities also due to public

demand in the country is made up of a group of muslim Malay.

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 First challenges Islamic banking in industry in term of managing liquidity,

pricing list and allocating credits, the key of banking is interest rate. Given that in the

Shari’ah principles, there is no riba’ (interest rate), the Islamic bank is facing a greater

management risk than the similar size of conventional bank. This is requisite to the need

of holding higher level of liquidity which leads to negative effect to compete.

Furthermore, according to the needs of Shari’ah compliant, liquidity instruments

and infrastructure may also increase the liquidity risk. Hence, there is a need of risk

analysis and risk management tools to provide agents with protection instruments to

hedge against a high volatility in currency and commodity markets (Zaher & Hassan,

2001). After that, the challenges that existing in Islamic banking regulation are based

on conventional banking model. Some product and services of the Islamic banking are

considered valid from legal perspective, but their practices are similar to the

conventional banking in term of pricing and interest rate benchmarking. In practice, the

contemporary Islamic banks finance focus more on popular product, a debt financing

with risk-free principle, whereas it is supposed to focus on risk-sharing mudharabah

and musharakah based on profit-and-loss sharing principles (Ahmadi, 2016).

Therefore, there is a need to strengthen the development of Shariah legal system that

offer better social value and uphold the risk-sharing spirit in Islamic Finance.

Based on issues and challenges of Islamic banking that a uniform regulatory

and legal framework supportive of an Islamic financial system has not yet been

developed. While, existing banking regulations in Islamic countries are based on the

Western banking model. Islamic financial institutions comparably are face troublesome

and hard operating in non-Islamic countries owing to the absence of a regulatory body

that operates in accordance with Islamic principles. The regulatory and governmental

framework that would address the issues specific to Islamic institutions would further

19
enhance the integration of Islamic markets and international financial markets. There is

no single, sizeable, and organized financial centre that can claim to be functioning in

accordance with Islamic principles. Although stock markets in appear Islamic countries

such as Egypt, Jordan, and Pakistan are active, and they are not fully compatible with

Islamic principles. The stock markets in Iran and Sudan that are very closest to

operating in compliance with Islamic principles. Moreover, the secondary market for

Islamic products is extremely shallow and illiquid, and money markets are almost non-

existent, since viable instruments are not currently available. The development of an

interbank market is another challenge.

The pace of the innovation is slow and the market has offered the same

traditional instruments geared toward short and medium-term maturities, but it has not

yet come up with the necessary instruments to handle maturities at the extremes. There

is a need for risk-management tools to provide clients with the instruments to hedge

against the high volatility in currency and commodities markets. In addition, the market

lacks that need instruments to provide viable alternatives for public debt financing. An

Islamic financial system needs accounting procedures and standards. Western

accounting procedures are not enough because of the different nature and treatment of

financial instruments. That apparent procedures and standards are crucial for

information disclosure, building investors’ confidence, and monitoring and

surveillance. The correct standards will also help the integration of Islamic financial

markets with international markets. Besides that, Islamic institutions have insufficiency

of trained personnel who can analyse and manage portfolios, and develop innovative

products according to Islamic financial principles. Islamic institutions only a limited

number can afford to train their staffs and deploy resources in product development.

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 Islamic banks tend to own a focused base of deposits or

assets. Muslim banks usually target a couple of selected sectors and avoid direct

competition together Muslim bank could specialise in data Technology sector

in finance, whereas another Muslim bank may do a similar finance within

the agricultural sector, and neither makes an attempt to diversify to alternative sectors.

This apply makes practicality of risk transfer is incredibly restricted, attributable to the

no organized markets for offloading risks to attain diversification.

Hence, Muslim banks area unit straightforward expose themselves to cyclic shock in a

very specific sector. In accordance with a tiny low range of sectors, it'll seems the

matter lack of diversification will increase their exposure to new

entrants, particularly foreign typical banks that area unit higher equipped to

satisfy these challenges. Muslim banking is underutilized benefits|the advantages} or

advantages that return from each product diversification and also the geographic issue.

Currently, they simply trust primarily on maintaining smart relationships with

depositors. However, these relationships are often tested throughout times of distress

or dynamical market conditions, likes interest and exchange rates can affects the

final commerce climate and aren't simply a matter of direct prices, rival existing, and

also the new technologies and innovations that might modification the market and

increase or cut back the demand for your existing product or service, once depositors

tend to alter loyalties and shift to a different money intermediaries they understand to

be safer.

The emergence of international conventional players in Islamic

banking in particular in the area of structuring Shari’ah compliant

investment and financing deals is another challenge for Islamic banking

system. Islamic banks now facing fierce competition from their competitors. Even

21
though the entry of some large international conventional banks around the world

such as Hong Kong and Shanghai Banking corporation, Chase Manhattan

Bank, Citibank, and Union Bank of Switzerland and others practising Islamic

banking techniques can be considered as an important development in

Islamic banking, it is however a big challenge for existing Islamic banks as

the size of the assets belong to the conventional banks are more greater than

the Islamic banks throughout the world.

Many people in Malaysia still have a wrong understanding or

misconception about the Islamic banking institutions even among the

Muslims itself which are their thou ght about the Islamic banking is only for

Muslims people, Islamic banking is non profitable ventures since there is

no interest charged and etc. Thus, Islamic banking institutions should create

more awareness among the public that is Islamic banking is not only an

alternative approach but in some aspects provides better value propositions

to the consumers. The Islamic banking institutions must play an active role

in educate the public about the potential of Islamic banking products and

also acknowledgeable and understand the meaning and capabilities of

Islamic banking.

In spite of all the challenges faced by the Islamic banks in Malaysia, Islamic

bank will definitely survive and able to compete with the conventional banks. The final

step to avoid that challenges are Islamic Finance with the enforcement of Islamic

principles of ethical and moral values plays important role in providing financial

stability of the world economic. The system is still at the beginning stage of growth that

needs to be developed further in term of legal, framework, regulation, infrastructure,

and product innovation. The unique system of Islamic Finance must be friendly to make

22
promoted and developed that product. Malaysia, with the most popular system of

Islamic Finance, can be further developed to tap the vast market potential of the world.

The country needs to overcome all restriction (six constraints from previous discussion)

in development of Islamic Finance by developing and providing practical work plan. In

international level, there is urgent need to increase collaboration and cooperation

between countries that practising Islamic Finance in order to provide standardize

system while maintaining all the Shari’ah based principles of Islamic Finance. Islamic

Finance must be creative and innovative to come out genuinely Islamic based Finance

products rather copying the conventional products. Islamic Finance is not limited to

Muslim only but also be considered accepted by non-Muslim.

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5.0 Conclusion

To be concluded, even though Islamic bank had to face many challenges, , Islamic

bank will definitely survive and able to compete with the conventional banks. The main

step to avoid that challenges are Islamic Finance with the enforcement of Islamic

principles of ethical and moral values plays important role in providing financial

stability of the world economic.

Besides, It also gives an overview of financial performance of Maybank Islamic

Berhad. Maybank Islamic Berhad have commendable financial performance and

strong capitalization. Maybank Islamic Berhad has higher ability to meets its short-term

liabilities and has an adequate level of liquid assets to satisfy the current period’s

obligations. Besides, Maybank Islamic can manage to meet the short-term obligations.

As an acknowledged Islamic Bank, Islamic Bank industry had dominated by

Maybank Islamic by development of new, competitive and innovative proposition

which surpass other Islamic bank company. Maybank Islamic Berhad not only aims to

meet consumer’s expectation but also to achieve the highest challenge of developments

in the Islamic Banking world. Maybank Islamic Berhad possessed with largest market

shares.

Furthermore, the biggest distribution channels and incredible expansion on

customer base reflects their credibility, ability and strength to be survive in Islamic

24
banking industry while also being acknowledged as the Global Leader in Islamic

Finance in 2015. It proves that how successful for Maybank Islamic in dominating the

Islamic banking industry in Malaysia.

6.0 References

1. Zaher, T. S., & Hassan, M. K. (2001). A comparative literature survey of

Islamic Finance and banking. Retrieved from: amazonaws.com/academia.edu.

https://www.researchgate.net/publication/318339465_Islamic_Finances_Grow

th_in_Malaysia_The_Challenges

2. Ahmadi, K. (2016). Islamic banking’s challenges and goals.

https://www.researchgate.net/publication/318339465_Islamic_Finances_Grow

th_in_Malaysia_The_Challenges

3. Yurtoğlu, N. History Studies International Journal of History 2018, 10 (7),

241–264.Islamic Financial Systems. Islamic Banking.

http://www.microfinancegateway.org/sites/default/files/mfg-en-paper-islamic-

financial-systems-1997.pdf

4. Maybank Islamic Berhad Financial Statement 2018. Derived from

https://www.maybank.com/iwov-resources/corporate_new/document/my/en/p

df/subsidiary-reports/2018/Maybank_Islamic_Fin_Statement_1QFY2018.pdf

5. Reviewed by Will Kenton and Adam Hayes, Jun 2019. Investopedia-debt- to-

equity ratio. Derived from

https://www.investopedia.com/terms/d/debtequityratio.asp

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6. Inc. Staff, Return on Assets. Derived from

https://www.inc.com/encyclopedia/return-on-assets-roa.html

7. Ryan Furman Jun 2019, How to calculate return equity. Derived from

https://www.investopedia.com/ask/answers/070914/how-do-you-calculate-ret

urn- equity-roe.asp

8. Aris, N. A., Othman, R., Azli, R. M., Sahri, M., Razak, D. A., & Rahman, Z.
A. (2013). Islamic banking products: Regulations, issues and
challenges. Journal of Applied Business Research, 29(4), 1145.

9. Azhar Rosly, S., & Afandi Abu Bakar, M. (2003). Performance of Islamic and
mainstream banks in Malaysia. International Journal of Social
Economics, 30(12), 1249-1265.

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7.0 Appendix

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