2016 was another interesting year for Islamic Banking. Economically, the industry followed the growth trend of the market; while still recording about 12.10% growth in the first 6 months of 2016, it is showing a slowdown in line with the overall economy. Nonetheless, there are still significant demand in Islamic Banking, and some financial institutions are also in the midst of moving from a conventional offering into Islamic Banking. Bank Pembangunan, for example, is undergoing transformation exercise into Islamic Banking. And another foreign bank just started to offer Islamic Banking products via a window in July. Small steps towards increasing the market presence for Islamic Banking.

While I cannot possibly recap all the happenings in the industry in this post, I would just like to look back into a few key items that I felt contributed to the industry’s development. The ones I picked up are:

1. Issuance of new Policy Documents (PD) in 2016. Another busy year for regulations, where BNM issued a total of 6 (six) new Policy Documents for Islamic Contracts ie Wakalah, Kafalah, Qard, Hibah, Wadiah and Ijarah. The biggest impact was perhaps the Qard PD where banks are expected to migrate existing portfolio of Wadiah into Qard by 2018. Also issued in Dec 2016 were the 2 cards-related Policy Document for products ie Debit Card-i and Credit Card-i. To go to the Regulations page, click HERE
2. Investment Account and Investment Account Platform. Investment Account remains one of the focus products by BNM pushing for risk-sharing structures mainly the Mudharabah (profit sharing entrepreneurship) and Wakalah Bi Isthihmar (Agency for Investment). Maybank Islamic, in particular, has gone out to actively promote Islamic Investment Account, and introduced Term Investment Account, which did very well in 2016 with declared returns of around 4.0% p.a. This outlines the potential to grow this product further. Furthermore, The Investment Account Platform (IAP) which is based on Musyarakah (Partnership) structure  also saw the first few listing of ventures made available to the public. A good start in 2016 and expected to see more listing in 2017.
3. Employee Provident Fund-i and Bursa Malaysia-i. These are 2 significant additions to the industry to provide more focus on Shariah compliant investment activities. EPF-i got a lot of positive news when it was announced, and the fund commenced operations beginning 1 January 2017 when participants funds who registered are now managed under the rules of Shariah. Bursa Malaysia-i was also launched with much fanfare where it is dubbed as the “world’s first end-to-end integrated Islamic securities exchange platform” where you are able to list, trade, clear and settle Shariah compliant instruments which complies with Shariah rules.

These developments hopefully will push the industry further, and personally I would like to see more being done in the Islamic Fintech sector. While I note there have been a significant number of “seminars and forums” discussing Islamic Fintech, unfortunately very little is being done in terms of Shariah discussions to support the real development needed. Hopefully those Banks that have started these initiatives to develop Islamic Fintech can introduce some of the innovations soon. I feel there is much work that is yet to be done.

For readers of this website, I also want to express my appreciation for you comments, feedback and support for 2016 and hope we can continue to build progressively our understanding and knowledge of Islamic Banking in 2017. Thank you and happy reading.