is presently attracting additional Islamic banking ventures to its jurisdiction.
There's no doubt that Islamic banking is a very large question mark to
Westerners and non-Muslims. It's a new financial system that barely existed
until recently, but is now picking up momentum. The budding industry has
arisen from the financial constraints imposed upon those who are devout
followers of Islam. The Islamic religion prohibits interest payments. A
prohibition against interest payments is effectively a prohibition against
a predetermined claim on a productive surplus. Therefore traditional Western
commercial banking is not accessible to those Muslims who wish to rigidly
adhere to the ideals of their faith. Since interest of any kind is forbidden
(and this holds true regardless of interest rates, or the purpose of the
interest-bearing loan), Islamic businessmen have discovered a clever way
around the ban. Islam allows the owners of capital to share in a
surplus as long as the surplus is uncertain. So Islamic banks instead invest
their money in trade and industry and share the profits with their depositors.
Only the ratio of the profit-sharing is known in advance, not the rate
of return itself. Therefore this is permitted under Islamic law. The result
of this strategy is that Islamic banks are equivalent to investment banking
institutions rather than commercial banks and can be best understood on
this basis. These banks typically offer three broad categories of
account: current, savings, and investment accounts. A current account gives
no return to the depositor, since it is nothing more than a safekeeping
arrangement between the depositors and the bank. Depositors may withdraw
their money at any time, and the bank may use the depositors' money.
the first Offshore Islamic investment bank in Malaysia, Al-Hidayah
Investment Bank (Labuan) Ltd. is set up with an objective of providing
an array of investment banking services to international clients.
wide range of asset management services are relevant to all investors
worldwide, and the bank also meets the particular needs of investors who
require shariah compliant investment services and financial planning tools.