Islamic Finance
Islamic finance in Malaysia refers to the financial practices and institutions that are based on Islamic principles, such as fairness, transparency, and the prohibition of interest. This system of finance is widely adopted in Malaysia, with the country being one of the largest and most developed Islamic finance markets globally.
In Malaysia, Islamic finance operates through a range of financial institutions, including Islamic investment funds. These institutions offer a variety of financial products and services that are compliant with Islamic principles, such as profit and loss sharing arrangements, Murabaha (cost plus financing), and Ijarah (leasing).
The Malaysia government has played a significant role in promoting and developing the Islamic finance industry, and established several initiatives to support its growth. These include the establishment of the International Islamic Finance Centre Malaysia to position Malaysia as a global canter for Islamic finance, and the development of a comprehensive legal and regulatory framework for the industry.
How It Helps Malaysia’s Economy
Malaysia is one of the Asian nations with the fastest economic growth, and it has a well-developed Islamic finance system. Early in the 1980s, Malaysia implemented Islamic financial policy as one of the Asian economies with the fastest economic growth and the most sophisticated financial system.
Over the past ten years, the Islamic financial sector in Malaysia, which consist of Islamic banking, Islamic capital markets, and takaful (Islamic insurance), has seen a tremendous increase in both its activities and its assets and capital. According to Bank Negara Malaysia, despite the fact that Malaysia’s economy experienced recessions in 2001 and 2009, the assets/capital of the Islamic financial system increased dramatically between 2008 and 2009, rising from 1.8 billion in 2008 to RM 2.4 billion in 2009, or a growth of over 76%.
Additionally, it can be seen that from the past 13 years between 2007 to 2019, it has maintained a positive growth of the trend. Besides, it increased the assets and liabilities of the whole financial system, demonstrating the value of Islamic financing to the Malaysia economy.
In conclusion, Islamic finance has made a significant contribution to the Malaysian economy and has played an important role in the country’s financial and economic development. Its growth and success have helped to position Malaysia as a leading player in the global Islamic finance industry.