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Introduction to Islamic Banking. Islamic banking is banking based on Islamic law (Shariah).

It follows the Shariah, called qh muamalat (Islamic rules on transactions). The rules and practices of qh muamalat came from the uran and the Sunnah, and other secondar! sources of Islamic law such as opinions collecti"el! agreed among Shariah scholars (i#ma$), analog! (qi!as) and personal reasoning (i#tihad). Islamic Banking in %ala!sia Islamic finance in %ala!sia began with an Islamic sa"ings institution known as the &ilgrims %anagement and 'und Board ((embaga Tabung )a#i) in *+,+. -s awareness of Shariah.compliant finance increased, a step.b!.step approach was implemented to de"elop a comprehensi"e Islamic financial industr!. The first full.fledged Islamic bank was established on the back of the Islamic Banking -ct *+/0. The introduction of Islamic 1windows,2 which allowed con"entional financial institutions to offer Shariah. compliant banking products and ser"ices, enabled the Islamic banking industr! to grow organicall!. This further facilitated the creation of a dual.financial s!stem, in which Islamic finance operates alongside the con"entional financial s!stem. The launch of the Islamic interbank mone! market in *++3 allowed the Islamic banking industr! to continue to flourish. Takaful companies were subsequentl! incorporated under the Takaful -ct *+/3. %eanwhile, the Islamic financial industr! progressi"el! liberali4ed o"er the !ears, allowing more foreign participation. 5otable milestones in the e"olution of %ala!sia$s Islamic financial industr! include the first sukuk issued b! a foreign.owned compan! in *++6, the entr! into %ala!sia of the first foreign Islamic bank from the %iddle 7ast in 8669 and establishment of the countr!$s first Islamic banking subsidiar! of a locall! incorporated foreign bank in 866/. The issuance of licences to foreign Islamic financial institutions promoted health! competition and added to the d!namism of the Islamic financial industr!. :obust market demand was met with highl! inno"ati"e Shariah.compliant products. ;"er the !ears, %ala!sia$s Islamic capital market grew deeper and broader as multilateral financial institutions and multinational corporations found Shariah.compliant products such as sukuk to be an attracti"e alternati"e means of raising capital. -fter more than three decades, %ala!sia$s Islamic financial industr! is now home to a critical mass of international and domestic financial institution and a di"erse range of inno"ati"e products and ser"ices. %ala!sia$s Islamic financial communit! also started globalising their business offering to strengthen economic and financial linkages with other global financial centres.

In 866,, the %I'< initiati"e was launched to position %ala!sia as an international Islamic financial hub. %ala!sia is the place to foster Islamic finance business linkages especiall! within the -sian region, and to take ad"antage of pro.business policies and market incenti"es. %ala!sia hosts the Islamic 'inancial Ser"ices Board (I'SB). This international prudential standard.setting organisation promotes soundness and stabilit! of the Islamic financial industr! b! issuing global prudential standards and guiding principles. Its international membership base includes regulator! and super"isor! authorities, intergo"ernmental organisations and financial market pla!ers. Islamic Banking as 5on Bank 'inancial Institutions. Islamic banks e=ist to fill the need for financial ser"ices that are compliant with Islamic rules concerning interest. Sharia law forbids the charging, or acceptance, of interest or other fees related to borrowing mone!. In the place of interest, Islamic banks make use of profit sharing arrangements, >safekeeping> agreements, #oint "entures, leasing and cost.plus accounting to e=tend credit in a wa! that is compliant with Sharia. -s an e=ample, an Islamic bank would not loan mone! to someone who wished to borrow a house or car. Instead, the bank might bu! the asset itself, agree to resell it to the would.be borrower at a higher price and take the pa!ments in installments. In practice, then, it is almost identical to how a regular mortgage or equipment loan works, as most mortgage borrowers pa! equal fi=ed amounts for the duration of the loan, but there is no formal interest in"ol"ed. %an! Islamic countries ha"e regular banks operating in their borders, but this is ne"ertheless a growth market. If nothing else, man! of these businesses are creati"e in how the! establish workable business models that compl! with rules on interest, and so on. 5ot surprisingl!, Iran, Saudi -rabia, %ala!sia, and ?-7 are among the leading nations in terms of assets managed b! Islamic financial institutions.

&ublic Bank Berhad <onceptualised as @a bank for the public@ b! its 'ounder and <hairman, Tan Sri Aato@ Sri Ar. Teh )ong &iow, &ublic Bank commenced business on , -ugust *+,,. &ublic Bank Broup offers a comprehensi"e range of financial products and ser"ices co"ering, amongst others, personal banking, commercial banking, Islamic banking, in"estment banking, share broking, trustee ser"ices, nominee ser"ices, sales and management of unit trust funds, bancassurance and general insurance products. Cith total assets of :%8D3.,8 billion as at the end of 86*8, the &ublic Bank Broup is the third largest banking group in %ala!sia and ranked number si= b! asset si4e in Southeast -sia. &ublic Bank is the largest non.go"ernment.linked corporation in %ala!sia with a market capitalisation of :%9D.98 billion as at the end of 86*8. It adopts a focused and consistent growth strateg!, which is to pursue organic growth in the retail banking business focusing on retail consumers and small. and medium.si4ed enterprises (>S%7s>), and stri"es to further increase its leadership in this broad.based retail banking market besides focusing on growing its loans in residential mortgages, passenger "ehicle financing and lending to S%7s. The &ublic Bank Broup has a large and well distributed branch network of 899 branches in %ala!sia to better ser"ice its large customer base of indi"iduals and business enterprises. Their mission is to sustain the position of being the most efficient, profitable and respected premier financial institution in %ala!sia.

&ublic Islamic Bank in %ala!sia &ublic Islamic Bank is a wholl! owned subsidiar! of &ublic Bank, which commenced its operations on * 5o"ember 866/. &ublic Islamic Bank has since *++0, offer Islamic banking products and ser"ices to the public when it started as a window "ia &ublic Bank. Ce contribute to the Islamic banking field as a whole, focusing on consumer and retail financing, small and medium enterprises as well as financing and deposit taking business. The fast pace de"elopment and growing acceptance b! %ala!sians regardless of race and religion calls for banking products and ser"ices that are not onl! Shariah compliant but also competiti"e. &ublic Islamic Bank$s competiti"e deposit and financing products are those that meet the call. -s one of the ke! pla!ers in the Islamic banking industr! and not to mention the top 9 Islamic banks in %ala!sia, &ublic Islamic Bank ha"e grown strong and stead! standing on strong capital growth from :%066 million in *++0, to :%*.* billion to date. &ublic Islamic has the added ad"antage in reaching out and meeting the needs of its customers as we le"erage on &ublic Bank@s solid branding and its large network of 89, &ublic Bank branches across the nation, in addition to its full.fledged Islamic branch at Eg Baru, Euala (umpur. Its impressi"e track record is backed and lead b! our esteemed Board of Airectors and the Shariah <ommittee who ensures &ublic Islamic Bank is on the right track, not onl! towards profitabilit! and stabilit!, but also in compliance with Shariah principles. &ublic Islamic Bank offers full Shariah.compliant banking solutions that meet !our needs. In an! station of life !ou are inF whether to sa"e or to finance, we pro"ide banking products and ser"ices that suit and ease life@s demands. 7=plore our products and bank with us or "isit !our nearest domestic branch.

&ublic Islamic Bank &rinciples in S!ariahF 'ew of the principles practised b! &ublic Islamic Bank according to S!ariah termF -manah :efers to deposit in trust. 7ntails absence of liabilit! for loss e=cept in breach of dut!. <urrent -ccounts are regarded as -manah (trust). If the bank gets authorit! to use the funds for its businesses, then it would transform into loan. -qad -n agreement between two parties which is legall! accepted and binding. It is formed with the declaration of I#ab (proposal) and abul (acceptance). Bai Inah Bai Inah is a contract of the sale of goods on a deferred pa!ment basis under which the customer will pa! the bank installments for the asset sold. Bai -s Salam Sale on future deli"er!. - contract whereb! the pa!ment is made in cash at the point of contract but deli"er! will be made at the pre.determined future date. Bai Bithaman -#il :efers to a method of sale on deferred pa!ment basis at a price which includes profit margin agreed b! the Bank and the <ustomer. )alal -n!thing that is permitted b! Shariah. In con"entional banking, all acti"ities are #udged on economic utilities. )owe"er, in Islamic banking, spiritual and moral factors are in"ol"ed. -lthough a ma#orit! of acti"ities are halal, there are some which are e=plicitl! prohibited (haram). )aram ?nlawful or forbidden. -n! acti"ities, actions or transactions which are e=plicitl! prohibited b! Shariah. )ibah )ibah or gift is a token of appreciation from the bank to the customer for allowing the bank to utili4e the funds (deposit) at the discretion of the bank as long as it is in line with Shariah principles. )owe"er, the customer cannot demand for it nor the bank can promise it. Ibra@ :efers to the rebate gi"en b! a part! on a "oluntaril! basis or based on discretion, to

another part!, in an! %uamalat transactions such as sale, purchase, and hire. Islamic bank usuall! grants Ibra@ of unearned profit to customers who settle their debt earlier than the period stated in the agreement. I#ab -n -rabic term for proposal. It also refers to @the offer@ in a contract. -n! Islamic financial contract depends on I#ab (proposal) and abul (acceptance). The contract is considered "alid if both parties agree on terms and conditions. (see abul) I#arah - lease agreement between the bank as the financierGownerGlessor and the customer as the hirerGlessee. The main contract used for our -l I#arah Thumma -l Bai (-IT-B) Hehicle 'inancing. The ownership remains with the owner throughout the lease period. Auring the lease period the hirer has the right to use the goods and this right of use re"ert back the owner at the end of the lease period. %udharib The entrepreneur or the bank accepting the mone! from the in"estor to be in"ested on behalf of the in"estors. %udharabah - form of partnership where one part! pro"ides the funds while the other pro"ides e=pertise and management. %urabahah <ost.plus financing. - facilit! upon which the bank will purchase the asset at cost and sell to the customer at a price agreed upon b! both parties. This selling price will include the cost price plus the bank$s profit margin. %usharakah &artnershipGIoint "enture under the profit and loss sharing agreement. <apital pro"ided b! all partners. ;ne or all partner isGare in"ol"ed in the actual work. &rofit is distributed according to a pre.agreed ratio. (osses are shared in proportion to the in"ested amount. :ahn <ollateral. -n arrangement whereb! a "aluable asset is placed as collateral for a debt. The collateral ma! be disposed of in the e"ent of default.

:iba -n e=cess or increase. It means an increase o"er the principal in a loan transaction or in e=change for a commodit! accrued to the owner (lender) without gi"ing an equi"alent counter."alue or recompense in return to the other part!. Sadaqah Holuntar! charitable gi"ing. Aonation. Shariah :efers to the di"ine guidance as gi"en b! the )ol! uran and the Sunnah of the &rophet. It embodies all aspects of the Islamic faith, including beliefs and practice. Sukuk Islamic bond. -n asset.backed bond which is structured in accordance to the Shariah and ma! be traded in the market. It represents a proportionate beneficial ownership in the underl!ing asset. Cadiah Safekeeping. Chen the assetsGpropert! of an owner is entrusted in the care of someone else for safe custod!. Cadiah in Islamic law is safekeeping contract based on the principle of trust (-manah) and hence, not sub#ect to an! liabilit!, e=cept in cases of negligence and misconduct. Cakalah -genc! <ontract. -bsolute power of attorne!, where a representati"e is appointed to undertake the transaction on behalf of the other.