Aug 9, 2009

Bank Islam – Malaysia first Syariah-based finance institution


Puteri Alia Halid, 12, Petaling Jaya; Nur Afiqah Azizan, 11, Bangi

WE were thrilled yet worried, but we accepted the assignment to write about one bank that is making waves in Malaysia’s banking industry.

We were scheduled to interview Datuk Wan Ismail Wan Yusoh, general manager for strategic planning, Bank Islam (M) Berhad.

You might ask: What’s so special about Bank Islam?

Well, what we learnt that day was very interesting.

Bank Islam made history for Malaysia as the first 100 per cent Syariah-based finance institution in the country that caters to the needs of Muslims.

Wan Ismail explained, “In Islam, when it comes to finance, we are advised to follow the Islamic rules for transactions known as Fiqh Muamalat. The main point in Islamic banking is profit sharing and no riba.”

Interest is a form of riba which is the extra money you charge or get on top of your initial amount.

Say, you borrow RM1,000 from a conventional bank and they charge a 10 per cent interest, you have to pay a total of RM1,100. If you pay late, you end up paying a late payment interest, too.

When it comes to Islamic banking, the loan is given based on goodwill. They lend you RM1,100 with no interest. At the end of the day, the amount is still the same but it does not involve any interest or riba.

And if you are wondering how the profit sharing works, well, when you deposit your money in a conventional bank, you earn interest but only the interest you were promised when you gave them your money.

In Islamic banking, no interest is promised to the depositor. The profit made is divided equally between you and the bank.

“And because the bank also invests with you, they will make sure the investment is a good one,” says Wan Ismail.

When it comes to hire purchase, the process is also different. In conventional banking money is loaned to you and you pay interest for it.

Things are different in Islamic banking.

“If you own a supermarket, you buy a shampoo at RM6, but you sell it to the customer at RM7. You make RM1 profit. That is already Islamic banking. You don’t impose interest but make profit by reselling,” Wan Ismail says.

So what can customers expect from this Syariah-based banking system?

“Equality,”” he says.

There were many challenges prior to the introduction of Islamic banking, key among them was the lack of expertise.

Wan Ismail explains: “The experts in banking do not know much about Syariah, and the Syariah experts do not know much about banking either. So, experts in both fields had to work together to find ideas and solutions to all the problems related to both.”

One of them was offering credit cards without charging the interest normally imposed. Bank Islam’s card became the first purely Syariah contract-based credit card to be offered without any riba or gharar (defined as uncertainty or ambiguity). They did this by allowing the customer to use his or her card for retail purchases and cash withdrawals but each transaction will be backed by the cash held in the account.

Despite the concerns, Bank Islam was overwhelmed by the response it received when Islamic banking was offered. According to Wan Ismail, “For the first 10 years, Bank Islam was all about product development. Our focus was to come up with products that could compete with those offered by conventional banks, as well as come up with new products that gave what the public wanted.”

At first we thought Islamic banking was only for Muslims, but we were proven wrong. As Wan Ismail explained, “There are places where Bank Islam has more non-Muslim depositors. Bank Islam is an Islamic financial institution and its objective is to do financing based on the Syariah. What matters most is that the Islamic principal is being practiced.”

As youngsters, we were eager to learn what Bank Islam has to offer us. For primary students, there is the Wadi Savings Account. Initial deposit is only RM1. And your money grows through profit-sharing.

The Ijraa Savings Account is more suitable for the secondary students. Again, the initial deposit is RM1 and you can have an individual or joint account.

Bank Islam also has Tunai Didik-i, an account our parents can open for us and credit a certain amount into until we reach 18. Something similar to a trust fund, you could say. Here grandparents, uncles, aunts and legal guardians can also participate. All they have to do is contribute a minimum of RM10 every month towards the child’s account. The beneficiary (the child) must be below 18 years of age.

For those at tertiary level, there’s good news, too. There’s a product called GradHitz. With GradHitz, you can have a credit card, insurance, personal loan, auto loan and even housing loan at very reasonable rates. Of course, you have to be between 20 and 30 years old and have a minimum qualification of a diploma for this.

What about a career with Bank Islam?

Well, just like any finance institution, Bank Islam is also looking for those with finance, accountancy and economic backgrounds, but to be with them, you need to equip yourself with Islamic banking knowledge as well.

Before the interview ended, Wan Ismail had some advice for us youngsters. He told us to be very careful with our money.

“Sometimes,” he said, “we have a lot of money in our pockets and sometimes, we don’t. Not every day is a sunny day. So, save your money. There are also unfortunate people around us. If we are able to help the unfortunate, help.

“When you spend, spend according to your financial capability. Remember – do not ask too much from your parents. Sometimes your parents cannot afford to give you everything you ask for. Learn to understand why. Use your money wisely.”

If you are interested in saving with Bank Islam, go to for more information on the bank’s products.

Source :
Photo from internet

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