Bank Islam Malaysia
Encyclopedia
The Bank Islam Malaysia (Bank Islam Malaysia Berhad, or BIMB) started operations as Malaysia's first Islamic bank on July 1, 1983. BIMB was established primarily to assist the financial
needs of the country's Muslims and to further extend its services to the whole population at large.
BIMB was set up with an initial authorized capital
of RM
500 million and paid in capital
of RM 79.9 million, the bank has gradually increased its authorized and paid-in capital to RM 2 billion and RM 563 million respectively.
ever in its 24 year history with a profit before zakat and tax (PBZT) of RM255.49 million for financial year ended 30 June 2007 (FY2007).
The PBZT, achieved on an all time high income of RM1.03 billion, also marks the Bank’s full recovery from last two years’ of losses.
In FY2006, it reported a loss
before zakat
and tax of RM1.28 billion on an income of RM948.87 million. Based on the FY2007 financial performance, the Bank achieved a return on equity
(ROE) of 24.5% and a return on assets (ROA) of 1.5%.
The Bank’s other financial indicators also improved in tandem. Total assets grew 30.9% to RM19.09 billion from RM14.60 billion, its risk-weighted capital ratio improved from -2.84% to 12.69%. (This compares with a minimum capital requirement of 8%). Earnings per share
improved to 17.41 sen compared to a loss of 175.24 sen the year before.
However, due to much furore from stakeholders, the bank has changed its logo from a stylized “K” to a crescent embracing the word “Islam”. The logo enhancement was launched in July 2008 during Bank Islam's 25th anniversary.
The bank’s logo rationale reads: “The strength of Bank Islam lies in the word ‘Islam’. In this word rests the bank’s commitment to advocate a banking system based on Shariah principles. The Bank Islam logo incorporates a ‘crescent’ embracing the word ‘Islam’, signifying the bank’s unwavering commitment to uphold Shariah principles in all our values, activities and transactions.”
Headquartered in London with a representative office in Bahrain, EIIB is the first independent syariah-compliant Islamic investment bank to be authorised and regulated by Britain's Financial Services Authority.
The firm started trading in April last year and reported a pre-tax profit of £1.9mil on revenue of £7.8mil for the year ended Dec 31, 2006. EIIB is listed on the Alternative Investment Market of the London Stock Exchange
.
The tie-up would give Bank Islam an immediate presence in Britain and Europe without the need to set up physical infrastructure while providing EIIB with a platform to expand its business to Asia. This effort is believe to enable Bank Islam to boost its fee-based income by drawing on EIIB's expertise and capabilities in corporate finance and advisory services. Bank Islam is believe to be more aggressive in offering a range of innovative Islamic financial products, particularly in fee income generating areas such as Capital market, Treasury
and Wealth/Asset management.
office from a subsidiary to a branch in December 2004, and the affair has cast doubt on the effectiveness of Malaysia's regulatory and supervisory control of its banking system.
In a statement, Bank Islam explained that an internal investigation into the affair, led by the bank's management team under managing director, Dato' Noorazman A. Aziz, who was appointed in April 2005 to help clean up the bank's books, is already underway, but no formal outcome have been reported yet. Preliminary investigation has resulted that, the problem rose due to the bank's poor credit evaluation, and insufficient depth and breadth in processing loans with the bank's risk management frame was not properly established. Huge non-performing loans also being detected mainly from the lending activities that was directed at the housing, car financing, and corporate financing markets which without proper purposes.
although declaring huge net loss was a noble and transparent move, but this bravery might jeopardize the image of the bank, as well the Islamic Finance overall. But, in his short period of time, Noorazman has taken huge effort in turning around Bank Islam. With his creditable past experience as the Head of Corporate and Treasury of Citibank
Malaysia, he has brought his creditability and transforming the bank's working culture with new management team and experts from all over Malaysian financial institution especially from Citigroup
, introducing new Credit Rating and Risk Management framework, centralizing the bank's approval center, revamping the bank's IT
system and enhancing the bank's human capital intervention with the introduction of the bank's first Management Associates programme known as the BMAP. Noorazman also play an important role in wooing foreign investors to take a stake in the bank in improving the bank's capital, notably the agreement with Dubai Islamic Investment Group. In April 2006, he has been named winner of the first Asian Banker Achievement Award 2005 for Islamic Finance.
Dato' Noorazman left Bank Islam Berhad in the of June 2006, to be the group Managing Director of BIMB Holdings, parent group of Bank Islam. This move was considered by most of economist and analyst as a further step taken by government of Malaysia to strengthen Malaysia potential to be the global Islamic Financial hub, where Noorazman being tip to cater the whole functions of the BIMB Holding, not only in managing Bank Islam but in the same time other BIMB Holding subsidiaries notably the "Takaful
" services. Noorazaman being replaced by Dato' Zukri Samat, former Managing Director of Danaharta and Khazanah Nasional
in July 2006.
In October 2005, the Malaysia business daily, The Edge
quoted Bank Islam CEO Noorazman Aziz saying that Bank Islam Malaysia Bhd unveiled a comprehensive plan to tackle its whopping RM2.2 billion(about USD 600 million) worth of non-performing loans (NPL
s). But little light was shed on how these bad loans arose in the first place, and more pertinently, who were responsible.
Noorazman A Aziz, the bank's managing director and CEO since April 2005, narrowed down the cause to Bank Islam Labuan Offshore Branch. Noorazman confirmed news reports that some RM450 million (about USD 113 million) of the bad loans was made to companies in Sarajevo and South Africa.
A July 2003 story published in the "Slobodna Bosna" magazine of Bosnia
suggests that Bank Islam Malaysia is holding or has held deposits worth about EUR 300 million for the benefit of the Third World Relief Agency (TWRA). The story further suggests that these funds have been now made available to Bomsal, a Malaysian - Bosnian joint venture, for the construction of a toll highway. Bosmal itself has confirmed that it had received a financial facility from Bank Islam, for the highway as well as other development projects in Sarajevo.
The subject matter of that story and the claims made on the Bosmal website were put to Bank Islam and the responses received were :
Market talk is that these companies are involved in construction and housing projects, and that more funds may need to be ploughed in to complete these projects before the borrowers can repay their debt. That EUR 300 million loan does not seem to appear anywhere in Bank Islam's books, and Bank Islam has refused to deny this assertion. As well the amount is way above Bank Islam's single customer lending limit.
the global financial investor of Dubai Holding
, declared that they have taken a 40 per cent stake in Bank Islam, Malaysia's oldest Shar'iah compliant bank.
Bank Islam, Lembaga Tabung Haji and DF signed three agreements, constituting a shareholders agreement, between BIMB Holdings Berhad, Lembaga Tabung Haji (LTH), Dubai Islamic Investment Group and Bank Islam Malaysia Berhad; a subscription agreement between the bank, its holdings company and majority shareholder Tabung Haji; and a separate subscription agreement between the bank, its holdings parent and Dubai Islamic Investment Group.
The deal was awarded the "Cross Border Deal of the Year" from the Islamic Finance News Guide. The deal represents the most significant cross-border Islamic transaction to date, integrating two hubs of the Islamic market.
Former Dubai Invsetment Group's CEO Soud Ba'alawy, currently the Executive Chairman of Dubai Group
, commented on this move:
Malaysia Berhad (StanChart) broke new ground in Islamic finance with the introduction of a shariah-compliant financial hedging tool to facilitate their in-house risk management and in the same time ensures that customers have access to hedge profit rates risks whilst enhancing their (customer) balance sheet management.
The deal is in the form of a Wiqa' Forward rate
Agreement (WFRA) which enables a floating rate based profit payment to be exchanged for a fixed profit payment for a specific period of time, or vice versa. With this type of services, both banks can better manage their portfolio of risks as they benefit from lessened exposure from either fixed
or floating rate because of WFRA, which will enable both banks to better predict financial results and improve their balance sheets where it allows either Bank Islam or StanChart to participate or exit the floating or fixed rate payments over shorter periods of time and make adjustments in the specific duration.
By having WFRA, Bank Islam is the first bank in the world to minimize their risk exposure to fixed rate payments, by swapping some of them with a conventional bank (non Shariah-compliant) for floating rate payments.
This product heavily being used with the expectation of a change in interest rates or the relationships between them, where on the Islamic framework the existence of interest rates being eliminated with Profit Rate. Commodity Murabahah will be used as the main vehicle for ICCS and WFRA.
through a nominated broker.
The trade entails a spot purchase of Shariah compliant commodities for immediate delivery and forward sale on deferred payment term (cost plus basis).
Commodity Murabahah has the following features:
On the first akad(negotiation), the bank sells the land to the customer at a principal price plus profit. On the second akad, the Bank purchases the land from the customer at the principal price only, whereby the Bank will then disburse the cash proceeds directly into the customer's Wadiah marginal account created and maintained by the Bank. The cardholder is allowed to use the cash in the Wadiah account for retail purchases and cash withdrawals. In cases where cardholder makes purchases over the financing limit and have exceeded their available balances, the Bank in its jurisdiction, will decide whether to give the cardholder Qardhul Hassan or not on a case-to-case basis.
purchases,
(2) Cash withdrawal facilities at Bank Islam ATM
s, (3) Easy payment accessibility and cash withdrawals at any Bank Islam branches and ATMs,
(4) Transfer of balance service; (5) Emergency cash
withdrawal and emergency card replacement when overseas; and (6) 24 hours
customer service.
) and gharar. It has a contract tenure of three to five years, with profit margins fixed for the tenure. The card accepts transactions from halal (permissible by Islamic law) sales merchants only and has a financing limit on par with that offered by other issuers and user.
coverage (save 3% per annum); (2) profit rebate (save 0.5% - 2.5% per annum); (3) no compounding elements (save 1.6% per annum); (4) Cash Withdrawal Fee (RM 12 for every RM 1,000 or part thereof performed at Bank Islam's ATM); (5) Balance Transfer Fee (RM 6.20 per request for any amount);(6) Annual Fee Waiver for the whole contract for principal cardholder (save RM 130 for Gold Card and RM 60 for Classic Card per annum); (7) Convenient payment facilities through Internet
Banking, Cash Deposit Machines, Interbank GIRO and SMS Banking.
Worldwide and SMarketForce Sdn Bhd jointly developed the syariah-compliant prepaid card. Bidding for the lucrative tourism sector, it targets China
and Middle East
market with its MasterCard
prepaid card.
Bank Islam currently has 290,500 cardholders (FY 2007) for its credit cards that accounted for 1.9% of the market share. It targeted the credit card holders to increase to 460,000 by June 2008 through aggressive promotion. The bank participation with the Malaysian Tourism Ministry is believed to tag with the tourist arrivals to Malaysia, whereas at May 2007 the volume is 8.9 million from all entry points and it's been estimated to increase up to 26 million tourists by 2010.
FINANCIAL
FINANCIAL is the weekly English-language newspaper with offices in Tbilisi, Georgia and Kiev, Ukraine. Published by Intelligence Group LLC, FINANCIAL is focused on opinion leaders and top business decision-makers; It's about world’s largest companies, investing, careers, and small business. It is...
needs of the country's Muslims and to further extend its services to the whole population at large.
BIMB was set up with an initial authorized capital
Financial capital
Financial capital can refer to money used by entrepreneurs and businesses to buy what they need to make their products or provide their services or to that sector of the economy based on its operation, i.e. retail, corporate, investment banking, etc....
of RM
Malaysian ringgit
The Malaysian ringgit is the currency of Malaysia. It is divided into 100 sen...
500 million and paid in capital
Paid in capital
Paid in capital refers to capital contributed to a corporation by investors through purchase of stock from the corporation . It includes share capital Paid in capital (Paid-in capital or Contributed capital) refers to capital contributed to a corporation by investors through purchase of stock...
of RM 79.9 million, the bank has gradually increased its authorized and paid-in capital to RM 2 billion and RM 563 million respectively.
Highest Profit Ever
Bank Islam Malaysia Berhad (Bank Islam), currently known as only Bank Islam reported its highest profitProfit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
ever in its 24 year history with a profit before zakat and tax (PBZT) of RM255.49 million for financial year ended 30 June 2007 (FY2007).
The PBZT, achieved on an all time high income of RM1.03 billion, also marks the Bank’s full recovery from last two years’ of losses.
In FY2006, it reported a loss
Income statement
Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...
before zakat
Zakat
Zakāt , one of the Five Pillars of Islam, is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy.-History:Zakat, a practice initiated by Muhammed himself, has played an important role throughout Islamic history...
and tax of RM1.28 billion on an income of RM948.87 million. Based on the FY2007 financial performance, the Bank achieved a return on equity
Return on equity
Return on equity measures the rate of return on the ownership interest of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity . ROE shows how well a company uses investment funds to generate earnings growth...
(ROE) of 24.5% and a return on assets (ROA) of 1.5%.
The Bank’s other financial indicators also improved in tandem. Total assets grew 30.9% to RM19.09 billion from RM14.60 billion, its risk-weighted capital ratio improved from -2.84% to 12.69%. (This compares with a minimum capital requirement of 8%). Earnings per share
Earnings per share
Earnings per share is the amount of earnings per each outstanding share of a company's stock.In the United States, the Financial Accounting Standards Board requires companies' income statements to report EPS for each of the major categories of the income statement: continuing operations,...
improved to 17.41 sen compared to a loss of 175.24 sen the year before.
Bounce back from humiliation
Dato’ Zukri, the current Managing Director attributed the remarkable recovery to the aggressive implementation of the five-component turnaround plan since last 2006 September to drive the Bank’s recovery. The plan included the implementation of strategic changes to grow new businesses and an intensive loan recovery programme, together with the vigorous re-branding exercise to change the mindset and the working culture, and the Bank’s approach to doing business in a market place that is increasingly more knowledgeable and sophisticated.Logo Restructuring
The bank’s corporate logo restructuring had set the bank back by an estimated RM54 million (US$16.98 million). But the move also sparked controversy earlier this year with its contentious logo launched in August 2007, which to some read “Ban Islam”, instead of “Bank Islam”, due to the positioning of a stylized “K” in the word “Bank”.However, due to much furore from stakeholders, the bank has changed its logo from a stylized “K” to a crescent embracing the word “Islam”. The logo enhancement was launched in July 2008 during Bank Islam's 25th anniversary.
The bank’s logo rationale reads: “The strength of Bank Islam lies in the word ‘Islam’. In this word rests the bank’s commitment to advocate a banking system based on Shariah principles. The Bank Islam logo incorporates a ‘crescent’ embracing the word ‘Islam’, signifying the bank’s unwavering commitment to uphold Shariah principles in all our values, activities and transactions.”
Gateway to Europe
With the strong support from its 40% owned by Dubai Islamic Investment Group, Bank Islam will gain entry into Europe's fast-growing Islamic financial services industry through its newly formed partnership with Britain-based European Islamic Investment Bank Plc (EIIB).Headquartered in London with a representative office in Bahrain, EIIB is the first independent syariah-compliant Islamic investment bank to be authorised and regulated by Britain's Financial Services Authority.
The firm started trading in April last year and reported a pre-tax profit of £1.9mil on revenue of £7.8mil for the year ended Dec 31, 2006. EIIB is listed on the Alternative Investment Market of the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
.
The tie-up would give Bank Islam an immediate presence in Britain and Europe without the need to set up physical infrastructure while providing EIIB with a platform to expand its business to Asia. This effort is believe to enable Bank Islam to boost its fee-based income by drawing on EIIB's expertise and capabilities in corporate finance and advisory services. Bank Islam is believe to be more aggressive in offering a range of innovative Islamic financial products, particularly in fee income generating areas such as Capital market, Treasury
Treasury
A treasury is either*A government department related to finance and taxation.*A place where currency or precious items is/are kept....
and Wealth/Asset management.
First Loss
Bank Islam in November 2005 for the first time in their history reported a loss of RM480 million (US$127,000,000), largely the result of high non-performing loans from its Labuan offshore unit. It closed its financial year with a total provision of RM774 million, and total non-performing loans of RM2.2 billion. The huge losses emerged when Bank Islam converted its LabuanLabuan
Labuan is a federal territory in East Malaysia. It is an island off the coast of the state of Sabah. Labuan's capital is Victoria and is best known as an offshore financial centre offering international financial and business services via Labuan IBFC since 1990 as well as being an offshore support...
office from a subsidiary to a branch in December 2004, and the affair has cast doubt on the effectiveness of Malaysia's regulatory and supervisory control of its banking system.
In a statement, Bank Islam explained that an internal investigation into the affair, led by the bank's management team under managing director, Dato' Noorazman A. Aziz, who was appointed in April 2005 to help clean up the bank's books, is already underway, but no formal outcome have been reported yet. Preliminary investigation has resulted that, the problem rose due to the bank's poor credit evaluation, and insufficient depth and breadth in processing loans with the bank's risk management frame was not properly established. Huge non-performing loans also being detected mainly from the lending activities that was directed at the housing, car financing, and corporate financing markets which without proper purposes.
Biting the bullet
Many critics do not favour Noorazman move which "biting the bullet"Bite the bullet
To "bite the bullet" is to endure a painful or otherwise unpleasant situation that is seen as unavoidable. The phrase was first recorded by Rudyard Kipling in his 1891 novel The Light that Failed...
although declaring huge net loss was a noble and transparent move, but this bravery might jeopardize the image of the bank, as well the Islamic Finance overall. But, in his short period of time, Noorazman has taken huge effort in turning around Bank Islam. With his creditable past experience as the Head of Corporate and Treasury of Citibank
Citibank
Citibank, a major international bank, is the consumer banking arm of financial services giant Citigroup. Citibank was founded in 1812 as the City Bank of New York, later First National City Bank of New York...
Malaysia, he has brought his creditability and transforming the bank's working culture with new management team and experts from all over Malaysian financial institution especially from Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, introducing new Credit Rating and Risk Management framework, centralizing the bank's approval center, revamping the bank's IT
Information technology
Information technology is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications...
system and enhancing the bank's human capital intervention with the introduction of the bank's first Management Associates programme known as the BMAP. Noorazman also play an important role in wooing foreign investors to take a stake in the bank in improving the bank's capital, notably the agreement with Dubai Islamic Investment Group. In April 2006, he has been named winner of the first Asian Banker Achievement Award 2005 for Islamic Finance.
Dato' Noorazman left Bank Islam Berhad in the of June 2006, to be the group Managing Director of BIMB Holdings, parent group of Bank Islam. This move was considered by most of economist and analyst as a further step taken by government of Malaysia to strengthen Malaysia potential to be the global Islamic Financial hub, where Noorazman being tip to cater the whole functions of the BIMB Holding, not only in managing Bank Islam but in the same time other BIMB Holding subsidiaries notably the "Takaful
Takaful
Takaful is an Islamic insurance concept which is grounded in Islamic muamalat , observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years...
" services. Noorazaman being replaced by Dato' Zukri Samat, former Managing Director of Danaharta and Khazanah Nasional
Khazanah Nasional
Khazanah Nasional Berhad is the investment holding arm of the Government of Malaysia entrusted to hold and manage the commercial assets of the government and to undertake strategic investments. Khazanah was incorporated under the Companies Act 1965 on 3 September 1993 as a public limited company...
in July 2006.
Bosnian Scandal
Despite all the changes and revamping efforts after 2005 and with the arrival of Dato' Zukri, Bank Islam still couldn't produce their final report on how the bank could end up bearing such a huge debt, the first in their history of existence. This has led to a lot of speculation and particularly a scandal known as the Bosnian Scandal.In October 2005, the Malaysia business daily, The Edge
The Edge
David Howell Evans , more widely known by his stage name The Edge , is a musician best known as the guitarist, backing vocalist, and keyboardist of the Irish rock band U2. A member of the group since its inception, he has recorded 12 studio albums with the band and has released one solo record...
quoted Bank Islam CEO Noorazman Aziz saying that Bank Islam Malaysia Bhd unveiled a comprehensive plan to tackle its whopping RM2.2 billion(about USD 600 million) worth of non-performing loans (NPL
NPL
NPL can stand for:* Nepal – ISO 3166-1 code for Nepal* National Priorities List – a list of hazardous waste sites in the USA* Non-Patent Literature – used before the United States Patent and Trademark Office...
s). But little light was shed on how these bad loans arose in the first place, and more pertinently, who were responsible.
Noorazman A Aziz, the bank's managing director and CEO since April 2005, narrowed down the cause to Bank Islam Labuan Offshore Branch. Noorazman confirmed news reports that some RM450 million (about USD 113 million) of the bad loans was made to companies in Sarajevo and South Africa.
A July 2003 story published in the "Slobodna Bosna" magazine of Bosnia
Bosnia and Herzegovina
Bosnia and Herzegovina , sometimes called Bosnia-Herzegovina or simply Bosnia, is a country in Southern Europe, on the Balkan Peninsula. Bordered by Croatia to the north, west and south, Serbia to the east, and Montenegro to the southeast, Bosnia and Herzegovina is almost landlocked, except for the...
suggests that Bank Islam Malaysia is holding or has held deposits worth about EUR 300 million for the benefit of the Third World Relief Agency (TWRA). The story further suggests that these funds have been now made available to Bomsal, a Malaysian - Bosnian joint venture, for the construction of a toll highway. Bosmal itself has confirmed that it had received a financial facility from Bank Islam, for the highway as well as other development projects in Sarajevo.
The subject matter of that story and the claims made on the Bosmal website were put to Bank Islam and the responses received were :
First Response
- "Bank Islam Malaysia Berhad is unable to comment or disclose the business dealing as we are governed by the Offshore Banking Act 1990, which clearly spells out client's confidentiality".
Second Response
- "Kindly contact Corporate Communications Department of the Central Bank of Malaysia. We are unable to entertain your question as we are guided by the Banking Secrecy Act".
Market talk is that these companies are involved in construction and housing projects, and that more funds may need to be ploughed in to complete these projects before the borrowers can repay their debt. That EUR 300 million loan does not seem to appear anywhere in Bank Islam's books, and Bank Islam has refused to deny this assertion. As well the amount is way above Bank Islam's single customer lending limit.
Dubai Connection
In June 2006 Dubai Islamic Investment Group, a subsidiary of the Dubai GroupDubai Group
Dubai Group is an investment company based in the United Arab Emirates, and a subsidiary of Dubai Holding. Originally founded in 2000 as The Investment Office, the company was renamed Dubai Group in 2005...
the global financial investor of Dubai Holding
Dubai Holding
Dubai Holding is a holding company that belongs to the Government of Dubai . It manages and controls 20 companies, which operate in real estate, hospitality, finance, healthcare, energy, research, education, entertainment, media, internet, tourism and biotechnology...
, declared that they have taken a 40 per cent stake in Bank Islam, Malaysia's oldest Shar'iah compliant bank.
Bank Islam, Lembaga Tabung Haji and DF signed three agreements, constituting a shareholders agreement, between BIMB Holdings Berhad, Lembaga Tabung Haji (LTH), Dubai Islamic Investment Group and Bank Islam Malaysia Berhad; a subscription agreement between the bank, its holdings company and majority shareholder Tabung Haji; and a separate subscription agreement between the bank, its holdings parent and Dubai Islamic Investment Group.
The deal was awarded the "Cross Border Deal of the Year" from the Islamic Finance News Guide. The deal represents the most significant cross-border Islamic transaction to date, integrating two hubs of the Islamic market.
Former Dubai Invsetment Group's CEO Soud Ba'alawy, currently the Executive Chairman of Dubai Group
Dubai Group
Dubai Group is an investment company based in the United Arab Emirates, and a subsidiary of Dubai Holding. Originally founded in 2000 as The Investment Office, the company was renamed Dubai Group in 2005...
, commented on this move:
- "We believe in the Malaysian market and this acquisition provides an excellent opportunity for Dubai GroupDubai GroupDubai Group is an investment company based in the United Arab Emirates, and a subsidiary of Dubai Holding. Originally founded in 2000 as The Investment Office, the company was renamed Dubai Group in 2005...
to add one of the oldest and most reputable Islamic institutions to our portfolio, thus enabling Dubai GroupDubai GroupDubai Group is an investment company based in the United Arab Emirates, and a subsidiary of Dubai Holding. Originally founded in 2000 as The Investment Office, the company was renamed Dubai Group in 2005...
to build on its strategic direction to grow within the Islamic banking sector."
Pioneer in Islamic Finance Services
Taking its position and reputation as the first Islamic Bank in Malaysia and one of the pioneer in the world, Bank Islam has taken numerous effort to be an innovative vehicle for the government of Malaysia in establishing Malaysia as the vital Global Islamic Finance Hub. In the effort to clean up the tarnish image due to the loss declaration in 2005, Bank Islam has introduce several products, considered to be the first in the world in order to sustain their customer's loyalty and perceptionsWiqa' Forward Rate Agreement (WFRA)
Considered to be first of its kind, on August 15, 2006 Bank Islam Malaysia Berhad (Bank Islam) and Standard Chartered BankStandard Chartered Bank
Standard Chartered PLC is a multinational financial services company headquartered in London, United Kingdom with operations in more than seventy countries...
Malaysia Berhad (StanChart) broke new ground in Islamic finance with the introduction of a shariah-compliant financial hedging tool to facilitate their in-house risk management and in the same time ensures that customers have access to hedge profit rates risks whilst enhancing their (customer) balance sheet management.
The deal is in the form of a Wiqa' Forward rate
Forward rate
The forward rate is the future yield on a bond. It is calculated using the yield curve. For example, the yield on a three-month Treasury bill six months from now is a forward rate.-Forward rate calculation:...
Agreement (WFRA) which enables a floating rate based profit payment to be exchanged for a fixed profit payment for a specific period of time, or vice versa. With this type of services, both banks can better manage their portfolio of risks as they benefit from lessened exposure from either fixed
Fixed
Fixed may refer to:* Fixed , EP by Nine Inch Nails* Fixed , a collection of monospace bitmap fonts that is distributed with the X Window System* Fixed, subjected to neutering...
or floating rate because of WFRA, which will enable both banks to better predict financial results and improve their balance sheets where it allows either Bank Islam or StanChart to participate or exit the floating or fixed rate payments over shorter periods of time and make adjustments in the specific duration.
By having WFRA, Bank Islam is the first bank in the world to minimize their risk exposure to fixed rate payments, by swapping some of them with a conventional bank (non Shariah-compliant) for floating rate payments.
Wiqa' Profit Rate Swaps (WPRS)
As and extension from WFRA, Bank Islam also introduce Wiqa' Profit Rate Swap (WPRS) in the Malaysia market. It is an agreement between 2 parties to exchange a series of profit payments denominated in a single currency for another series of profit payments denominated in the same currency, based on a notional principal amount over agreed tenor.Islamic Cross Currencies Swap (ICCS)
Enhancing the capabilities for Islamic Hedging, Bank Islam has succefully initiated the first USD/MYR ICCS in the world with the introduction of ICCS in Malaysia market in June 2007, where the bank and its customers altering their exposure to interest-rate fluctuations, by swapping fixed-rate obligations for floating rate obligations.This product heavily being used with the expectation of a change in interest rates or the relationships between them, where on the Islamic framework the existence of interest rates being eliminated with Profit Rate. Commodity Murabahah will be used as the main vehicle for ICCS and WFRA.
Commodity Murabahah
Commodity Murabahah is a trade–related transaction utilized to facilitate the origination of Bank Islam Treasury and other Banking products. The main structure of this transaction will be based on the actual trading of steel in London Stock ExchangeLondon Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
through a nominated broker.
The trade entails a spot purchase of Shariah compliant commodities for immediate delivery and forward sale on deferred payment term (cost plus basis).
Commodity Murabahah has the following features:
- "Fixed rate of return"
- "Fixed maturity period"
- "Known risk profile"
Bank Islam Card
Bank Islam is the first bank in Malaysia to introduce Credit Card Chip Based (SMART Chip), with the introduction of Bank Islam Card. The Bank Islam Card is based on 3 Shariah concepts, considered to be the first in the world:- Bai Inah - The sale of the land by the bank on a deferred payment basis, which the bank then buys back the land by cash at a lower price
- Wadiah - Guaranteed safe custody of cash by cardholder, which allows the cardholder to make use of the cash.
- Qardhul Hassan - It is the over limit usage of cash by the cardholder. The cardholder will not be levied with extra charges or fees but will be required to repay the over limit amount used.
On the first akad(negotiation), the bank sells the land to the customer at a principal price plus profit. On the second akad, the Bank purchases the land from the customer at the principal price only, whereby the Bank will then disburse the cash proceeds directly into the customer's Wadiah marginal account created and maintained by the Bank. The cardholder is allowed to use the cash in the Wadiah account for retail purchases and cash withdrawals. In cases where cardholder makes purchases over the financing limit and have exceeded their available balances, the Bank in its jurisdiction, will decide whether to give the cardholder Qardhul Hassan or not on a case-to-case basis.
Services of Bank Islam Card
The services offered by the Bank Islam Card include: (1) RetailRetail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
purchases,
(2) Cash withdrawal facilities at Bank Islam ATM
Automated teller machine
An automated teller machine or automatic teller machine, also known as a Cashpoint , cash machine or sometimes a hole in the wall in British English, is a computerised telecommunications device that provides the clients of a financial institution with access to financial transactions in a public...
s, (3) Easy payment accessibility and cash withdrawals at any Bank Islam branches and ATMs,
(4) Transfer of balance service; (5) Emergency cash
Cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...
withdrawal and emergency card replacement when overseas; and (6) 24 hours
24 Hours
24 Hours and 24 Heures is a chain of free daily newspapers published in Canada by Sun Media, a subsidiary of Quebecor Media...
customer service.
Features of Bank Islam Card
Based on the Shariah contract that free from riba (interestInterest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
) and gharar. It has a contract tenure of three to five years, with profit margins fixed for the tenure. The card accepts transactions from halal (permissible by Islamic law) sales merchants only and has a financing limit on par with that offered by other issuers and user.
Latest SMART Chip Technology
Benefits of the Bank Islam Card include: (1) Free group family TakafulTakaful
Takaful is an Islamic insurance concept which is grounded in Islamic muamalat , observing the rules and regulations of Islamic law. This concept has been practised in various forms for over 1400 years...
coverage (save 3% per annum); (2) profit rebate (save 0.5% - 2.5% per annum); (3) no compounding elements (save 1.6% per annum); (4) Cash Withdrawal Fee (RM 12 for every RM 1,000 or part thereof performed at Bank Islam's ATM); (5) Balance Transfer Fee (RM 6.20 per request for any amount);(6) Annual Fee Waiver for the whole contract for principal cardholder (save RM 130 for Gold Card and RM 60 for Classic Card per annum); (7) Convenient payment facilities through Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
Banking, Cash Deposit Machines, Interbank GIRO and SMS Banking.
Bank Islam Debit Card
Bank Islam Malaysia Bhd has targeted 80,000 new cardholders for its first debit card, Bank Islam Tourist Friend MasterCard Unembossed prepaid card, within one year of its launching. MasterCardMasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
Worldwide and SMarketForce Sdn Bhd jointly developed the syariah-compliant prepaid card. Bidding for the lucrative tourism sector, it targets China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...
and Middle East
Middle East
The Middle East is a region that encompasses Western Asia and Northern Africa. It is often used as a synonym for Near East, in opposition to Far East...
market with its MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
prepaid card.
Bank Islam currently has 290,500 cardholders (FY 2007) for its credit cards that accounted for 1.9% of the market share. It targeted the credit card holders to increase to 460,000 by June 2008 through aggressive promotion. The bank participation with the Malaysian Tourism Ministry is believed to tag with the tourist arrivals to Malaysia, whereas at May 2007 the volume is 8.9 million from all entry points and it's been estimated to increase up to 26 million tourists by 2010.