Islamic Revivalism Movement Towards The Establishment Of Islamic Banking And Finance In Malaysia
Islamic revivalism refers to a revival of the Islamic religion throughout the Islamic world, that began roughly sometime in 1970s and is manifested in greater religious piety, and community feeling, and in a growing adoption of Islamic culture, dress, terminology, separation of the sexes, and values by Muslims. It has been defined by some of the Muslim scholar as the cleansing in an effort to return Islam to its original pure form. One striking example of it is the increase in attendance at the Hajj, the annual pilgrimage to Mecca, which grew from 90,000 in 1926 to 2 million in 1979 (Kepel, ...view middle of the document...
This effort is seen to be the first attempt by the Malaysian government in the establishment of Islamic finance. The government has set up the Perbadanan Wang Simpanan Bakal-bakal Haji in 1962 and began its operation on 30 September 1963. The corporation to manage the savings of Muslims intending to perform Hajj pilgrimage without involving in activities deemed haram in Islam. This corporation now is known as Tabung Haji.
In the same year of operation of the corporation, the first experiment in Islamic banking was set up undercover in Mit Ghamr, Egypt. The model for the experiment was the German Savings bank modified to comply with Islamic principles, i.e. it was barred from charging and paying interest. Nevertheless, the charter of the Bank did not refer to Shariah. This was the results of elementary concepts of modern Islamic banking in the mid 1940s and the appearance of models for Islamic banking in the mid-1950s.
The second Islamic Conference of Foreign Ministers in 1973 adopted a document on the "Institution of an Islamic Bank, Economics and Islamic Doctrines". In 1974, the Islamic Development Bank (IDB) was established as a result of this conference. The member states of the OIC became members of the IDB. The IDB helped to establish a number of Islamic banks in various countries.
Beginning in 1974, several Islamic banks have been established which include: Dubai Islamic Bank in 1975, Faisal Islamic Bank of Sudan in 1977, Faisal Islamic Egyptian Bank and Islamic Bank of Jordan in 1978, Islamic Bank of Bahrain in 1979, the International Islamic Bank of Investment and Development, Luxembourg in 1980.
The issue of Riba has long been a problem for Muslims. Even what constituted Riba itself has been a subject under serious discussion. The existence of Riba has been argued to be a major factor for the low participation of the Malays in the economic activities of Malaysia. At the outset, the most important departure of Islamic banking from conventional banking is the prohibition of Riba, and promoting Profit and Loss Sharing (PLS) as an alternative to Riba. The prohibition of interest is obvious in the Quran as well as in the Sunnah. Riba originally meant 'increase and growth'. This meaning is taken from the Quran (22:5). Increase means the increase over capital or nominal amount, the increase being either large or small. According to Islamic law, Riba technically refers to the premium that must be paid by the borrower to the lender along with the principal amount as a condition for an extension in its maturity.
Bank Islam Malaysia Berhad (BIMB) was established after the enacting of the Islamic Banking Act (IBA) in 1983, the IBA permitted the establishment of the first Islamic Bank in Malaysia. BIMB with a paid up capital of RM 100 million and an authorised capital of RM 500 million is carrying out its activities on an interest free basis. The establishment of BIMB is a major step towards an interest-free financial system in Malaysia. This...