Abstract
This study investigates the background of the pioneers of Bank Islam Malaysia Berhad (BIMB) and their perception of Islamic banking to explore the influence that their background had on the practices of BIMB, which have been criticized for being too similar to those of conventional banking. Accordingly, this study opts to explore this topic using interviews with the pioneers, complemented by archival research. Results of the research into the pioneers’ background and their perception of Islamic banking show that most came from a conventional banking background as part of the strong network of the founder of the bank, Abdul Halim Ismail. Furthermore, to fulfill the government’s expectations, they intended to make conventional banking Islamically acceptable rather than simply implementing the profit-and-loss sharing envisaged as ideal by Islamic economists, so they could provide modern banking facilities to economically underrepresented Malay Muslims. The findings reaffirm the significance of the intermediary role of practitioners, their background and philosophy in the development of products and services. In addition, the findings suggest the need for a reevaluation of the research of social scientists exploring whether Islamic banking offers an alternative to conventional global banking, as the pioneers of BIMB did not deny the value of conventional banking, but rather sought to learn from conventional banking to provide competitive banking products in a workable Islamic way.
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Notes
Conventional banking represents commonly known banking with interest fees and this term is normally used in the literature of Islamic banking to distinguish between the two.
Although Riba is normally construed as being interest in conventional banking, the Muslim scholarly definition of Riba is not necessarily interest. In fact, Muhammad Sayed Tantawi, the rector of Al-Azhar University in 1989, issued a Shariah interpretation, which permitted interest in banking as profits rather than usury (Wilson 2002).
Islamic banking products based on profit-and-loss sharing have a similar structure to equity finance in conventional baking, such as an investment trust.
In the transaction of Bay’ al-‘Inah, a customer sells an asset to a bank for cash on the spot and buys it back shortly thereafter at a mark-up on a deferred payment basis. Shariah scholars tend to point out that the Islamic transaction has the possibility of being abused or misused and may detach finance from the real economy (Rosly 2005).
The interviews were conducted in English.
Masjid means Mosque in Malay.
PERNAS is a government-linked company which was established in 1969 for the purpose of promoting the participation of Malays in finance and business management in the private sector.
UMNO is the acronym of the United Malays National Organisation, a political party which had dominated Malaysian politics from its independence until May 2018.
Murabahah is a cost-plus financing in which a bank purchases an asset, such as a car or a house, to sell to a customer on a deferred payment basis. The above-mentioned KFH’s car financing was also facilitated by this Islamic transaction.
Musharakah is one of the profit-and-loss sharing products.
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Kitamura, H. Who pioneered Islamic banking in Malaysia? The background of the pioneers of Bank Islam Malaysia Berhad. Cont Islam 14, 75–93 (2020). https://doi.org/10.1007/s11562-019-00443-w
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DOI: https://doi.org/10.1007/s11562-019-00443-w