KUCHING: Kuwait Finance House (Malaysia) Bhd (KFH Malaysia), a pioneering bank that was incorporated in 1975 in accordance with Islamic principles of syariah, is calling for better awareness among customers that Islamic banking is not only an alternative financial approach but also in some aspects provides better value propositions to the consumers.
In an exclusive interview with The Borneo Post, the bank’s chief executive officer (CEO) Datuk Jamelah Jamaluddin pointed out that Malaysia’s Islamic finance industry had been in existence for over 30 years.
“The enactment of the Islamic Banking Act 1983 enabled the country’s first Islamic bank to be established and thereafter, with the liberalisation of the Islamic financial system, more Islamic financial institutions have been established.
“There are over 300 Islamic financial institutions worldwide across 75 countries. According to the Asian Banker Research Group, the world’s 100 largest Islamic banks have set an annual asset growth rate of 26.7 per cent and the global Islamic finance industry is experiencing average growth of 15 to 20 per cent annually.
“Rapid liberalisation in the Islamic finance industry and facilitative business environment has encouraged foreign financial institutions to make Malaysia their destination of choice to conduct Islamic banking business.
“This has created a diverse and growing community of local and international financial institutions. Full-fledged Islamic banks are given permission to conduct both ringgit and non-ringgit businesses,” Jamelah said.
When asked about the growth of clientele base in the country, she said that so far, the growth in Islamic banking had come from customers switching to Islamic banking from the conventional banking space.
Muslims as well as non-Muslims were starting to see the benefits of Islamic banking and explore syariah-compliant products and services, she remarked.
On the key principle differences between conventional or traditional banking and Islamic banking, the CEO pointed out that Islamic banking differed from conventional banking as it emphasised partnership while prohibiting ‘riba’ or interest.
“Islamic banking aims to create business activities that generate fair and equitable profit from transactions that are backed by real assets.
“It also serves the community at large by promoting ethical investment and by being responsible with a customer’s money right from its source to where it is channeled,” she elaborated.
Nonetheless, the Islamic banking sector was not without challenges as she noted, “Despite the growth, there still is a lack of understanding on the concept, potential customers and benefits of Islamic banking.
“There is also a lack of uniformity between syariah views due to the divergences of opinions between the different schools of law and methodologies that may be called upon when elaborating on the law.
“Syariah interpretation also has to consider business practicability/financing commercial viability,” she emphasised.
Jamelah highlighted that in terms of infrastructure financing, KFH Malaysia had became the main financier in the development project of Islamic religious schools in the state of Johor July 2011.
“The Islamic financing, through a Murabahah Tawarruq facility of up to RM160 million, has been provided to MysysNet Development Sdn Bhd, the company appointed by the Johor state government to undertake the project.
“KFH Malaysia financing will be utilised towards the construction of 97 Islamic religious schools from Phase One to Phase Four,” she stated.
With regards to the attractiveness of KFH’s banking products, the CEO cited an example in saying an increasing number of customers had been interested in KFH Gold Account-i, Muslims and non-Muslims alike.
“Since KFH Account-i was introduced in February 2010, close to10,000 account holders have been recorded. Approximately 30 per cent of KFH Malaysia’s customers are Gold account holders.
“This contributed to around 1.5 tonnes of gold sold. KFH Malaysia also recently launched the first Islamic Junior Gold Account-i for customers below 18 years old. The initial deposit can be as low as five grammes.”