Islamic banking in Malaysia: from beginning to development phase

Abstract

It seems that the main goal of Islamic finance is equal distribution because Islam believes that the
mass exploitation of resources for obtaining maximum profits could create inequity in society; besides
the principles of Islamic transaction are required to check inequities, exploitation and the creation of an
imbalance in Islamic society by using a different type of concepts, rules and principles to eradicate unjust
enrichment. In other words, Islamic banks are in the race to innovate and introduce many numbers of
products and services to remain competitive in the industry as well as profitable. In order to compete
with conventional banks and capture greater profits and market share, Islamic banks are making huge efforts
to acquire the maximum number of customers by providing and offering a large number of products
as an alternative for interest-based banking services and products. Malaysia is one of the first countries
in the world that started Islamic banking and supported this type of banking for customers around the
world. It has been argued that this country is the most developed nation in the world in the area of Islamic
banking and the competition that exists between Islamic banking and convention banking methods is
very fierce. This paper summarizes different phase of Islamic banking in this country and the steps that
has been passed by this nation to have such a success in the banking industry.
Key words: Islamic banking, transaction, Islamic finance, Malaysia, payment.