RESOURCES UNDER ISLAMIC BANKING LAW

TOTAL RESOURCES OF ISLAMIC BANKING UNDER ISLAMIC LAWS.

As in conventional banking, the Islamic Banking system needs to raise funds too. Deposits remained the primary source of funds, accounting for more than 90% of total resources. Islamic banking resources recorded positive annual growth, increased rapidly at an average rate of more than 60%. This is largely attributed to the tremendous hike in total deposits, shareholders’ funds of the Islamic banks and also the Islamic banking funds of the “Skim Perbankan Islam” (Islamic Banking Scheme which allows conventional banking institutions to offer Islamic banking products and services using their existing infrastructure.)

Due to the intensive publicity campaign to promote Islamic banking products in most banking institutions, the increased awareness among the general public on the availability of Islamic banking products coupled with the relatively competitive/attractive returns of Islamic banking deposits as compared to that on conventional banking deposits,Islamic banking deposits recorded a very high growth rate ever since the establishment of the Malaysia’s first Islamic bank licensed under the Islamic Banking Act 1983.

In order to allow the Malaysian Government to issue Government Investment Issues (GII) based on Islamic principles, another law, namely: Government Investment Act 1983 was also enacted along with the Islamic Banking Act, 1983. The introduction of GII enables the Islamic bank to meet their liquidity requirements and also acting as a financial instrument to absorb any idle funds in the short term.

Private sector (individuals, business enterprises and financial institutions, etc.) remained as the major depositors in the Islamic banking system in Malaysia. This significantly reflects the general expansion of business activities in the economy and also the continued acceptance of Islamic banking concepts by individuals.
Statutory authorities and the Federal government also contribute to the strong growth of total resources. Deposits from the Government bodies are mainly in the form of current account deposits.

In terms of deposits by type, the bulk of the total Islamic deposits are in the form of investment deposits, besides savings and demand deposits. With the introduction of the Islamic Negotiable Instruments in late 1998, additional funding avenue was opened for the Islamic banking institutions.

Islamic banking system provides numerous liability products similar to the various deposits products of the conventional banking.

All deposits accepted by the bank from its customers are under the ambit of the Unclaimed Moneys Act 1965._