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Bank Islam

Established in 1983, Bank Islam is the first Shariah based banking institution in Malaysia and South East Asia; and plays a leading role in the development of the nation’s Islamic banking industry. Dato’ Sri Zukri Samat, the bank’s Managing Director sat with us to give us a behind the scenes look at this innovative bank and its services.

My philosophy, in life and in running a business, has always centred on ethics and integrity. I believe in doing the right thing and stand guided by this belief especially where decision-making is concerned.

A full-fledged Islamic bank, we provide a host of carefully formulated, Shariah compliant products and services to cater to the demands of clients with an eye on the advantages of Islamic banking. Taking the purist approach, Bank Islam is seen as a "true blue" Islamic bank and this attracts customers who do not compromise on Shariah principles especially in relation to co-mingling of funds. This is why we are resolute on the matter, ensuring Shariah principles are strictly adhered to where business conducts, corporate responsibility and product offerings are concerned.

Bank Islam, as a pioneer, intends to continue playing an important role in the industry. We believe that the Investment Account (IA) framework, which came into force under the Islamic Financial Services Act (IFSA) 2013, will be a catalyst for Islamic banks to move towards "risk sharing" product offerings in line with the true spirit of Islamic finance (IFSA 2013 stipulates the need to distinguish between deposits and investment accounts while the decision to place funds in either product depends on the investor and his risk appetite). It is expected that the development of more IA products in the future will give a competitive edge to Islamic finance and aid the expansion of Islamic banking assets in the future.

It is a fact that many Islamic banks are competing head-on against their conventional peers; this is precisely why we normally benchmark ourselves against our conventional counterparts. What this means is we use the standard banking indicators such as those related to operational efficiencies, profitability, liquidity, etc to benchmark our performance on a regular basis to ensure that we are progressing in line with the industry.

The attribute required in order to excel in the area of Shariah compliant banking lies in itself and that is: strict abidance to Islamic finance principles as it forms the basis of the trust placed in the Islamic banks by the growing number of clients who bank based on their convictions.

Some of the major challenges currently faced by the financial industry are increasingly fierce competition, international regulatory compliance and introduction of macro prudential measures. The Islamic financial industry in particular, despite the promising development, is facing considerable challenges such as lack of awareness and public understanding of Islamic finance. There is also a shortage of talents in Islamic finance that poses a significant impact as it will affect the future growth of Islamic finance.

Nevertheless, Islamic finance has shown progress and advancement in terms of growth, dynamism and stability. Over the last five years the Islamic banking assets within Malaysia’s banking industry have more than doubled, expanding from RM303 billion (US$93 billion) at end of December 2009 to RM625 billion (US$177 billion) at end of December 2014. The growth of Islamic finance industry in Malaysia has been continually strengthened by the operational environment of progressive regulation, favourable tax regimes and, most importantly, supportive authorities within the country. Globally, it has experienced robust expansion in the past five years, recording a 17.3% Compounded Annual Growth Rate (CAGR) between 2009 and 2014. One of the major influences is the interest of non-key Islamic finance jurisdictions like Africa, Singapore and Europe to tap into this growing market.

This is a testament to its universal appeal and propositions i.e. application of Islamic principles which promote ethical and responsible financing; requirement of Islamic financial transactions to be supported by genuine productive economic activity; and the emphasis on risk-sharing; all of which would strengthen further the link of finance to the real economy.

Our strength is innovation. We are proud to say that our innovative product offerings have been one of our main contributions to the industry. We were the first to innovate and market new Islamic offerings such as the award winning Transaction-at-Palm Mobile Banking-i ("TAP-i"); unique benefits such as Payment Holiday for our house financing customers where our customers are required to pay only 10-monthly instalments instead of 12 in a year; and the first to launch University Debit Card (UniDebit), a multipurpose debit card that not only serves as a debit card but also provides university and library access and university identification functionalities.

We are pleased that our efforts are acknowledged by our customers and the financial industry as seen in the string of awards and accolades that we have received in the past. For me, the recognition reflects the commitment of the management team and the entire workforce and I am very proud of what we have achieved so far.

The new IA framework (under IFSA 2013) allows Islamic banks to benefit from capital relief for the underlying assets and exemption from Eligible Liabilities (EL) for Statutory Requirement Reserve (SRR) calculation required by the central bank, Bank Negara Malaysia. Under this framework, an Investment Account Platform (IAP) is expected to be launched soon. The IAP will serve as a central marketplace to finance small and medium-sized businesses, providing participating banks with the framework to offer investors a wider range of Shariah-compliant investment options with differing risk-return profiles. This will broaden the traditional role of Islamic banks from credit provider to investment intermediary. As one of the four founding financial institutions to spearhead the IAP, Bank Islam will be at the forefront of the opening up of new frontiers of financial activities akin to those offered by investment houses.

We foresee the challenging situation will continue into 2016. As an industry player, we accept the fact that market dynamics are changing fast and Islamic banks must improve their strategic positioning and operational efficiency. For us this means we will also be focusing on cost containment as one of the key priorities as top line growth remains a challenge. Driving efficiency of capital management is also crucial as we strive to meet regulatory requirement.

I would like to see Bank Islam growing from strength to strength and one day makes a foot print outside Malaysia.

Contact Details

Company: Bank Islam Malaysia Berhad

Name: Dato’ Sri ZukriSamat (Managing Director)

Web Address: www.bankislam.com.my

Address: Executive Suite, Menara Bank Islam,

22 Jalan Perak, 50450 Kuala Lumpur, Malaysia