Effiecieny of Islamic Banking in Malaysia

Main competitive pitch of Islamic banking is in Sharia compliant and interest free. But the real business of Islamic banking is producing profit.

An Islamic financial institution such as financial banking has been established before two or three decades ago in the aim to provide satisfactory financial facilities to the interested parties as compared to conventional banks. In 1974 Dubai Islamic bank which is the first Islamic commercial bank was established and later Islamic Development Bank (IDB) has been established in 1975 (Hennie and Iqbal, 2008).

Home is an essential need for human life. Everybody needs an asylum for rest, rest, solace and assurance from sun and downpour. It is a spot to abide in solace with gang. In this manner, owning a decent home is a desire of everybody. Individuals satisfy this need by building a home all alone, buying it or leasing it from others. Undoubtedly, installment for home loan typically takes a decent piece of one's month to month pay. Customary home loans are, obviously, hobby based and prohibited in Islam. The most prominent kind of financing by every Islamic bank in Malaysia is Bai' Bithaman Ajil. Bai' Bithaman Ajil implies a "conceded installment deal". It is a method of Islamic financing utilized for property, vehicle, as well as financing of other

11 Sheikh, N. A. and Karim, S., “Determinants of profitability of Islamic commercial banks: Evidence from Pakistan”, Pakistan Journal of Islamic Research, Vol. 17

the First International Conference on Islamic Banking, held in Dubai in 1979, it has not been widely implemented throughout Islamic financial system (Bendjilali and Khan,1995, p. 16). It is a relatively new and very little used product available for Islamic banks. The paper claims that MMQ is more in line with Shari’ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MMQ possibly has a comparative advantage for both financiers and the customer when compared with

Malaysian financial system has started since before its independence in 1957, however, in those times, foreign banks were the only financial institution operating in the country. In contrast, domestic banks1 waited until 1959 to start with the implementation of the Central Bank of Malaysia (Matthews and Ismail 2006).

In this system, conventional banks make profit through the different rates of interest by borrowing and lending of money. However, one of the drawbacks of conventional banking is that it is prohibited from trading in the shareholding of the borrowing concern. (Shahid H. , et al., 2010). The performance of all the banks in the country may not necessarily be on the positive side especially since the recent financial crisis of 2007. Banks have managed to pull through but not without some being injured in terms of stock prices or profits. In 2002, the Malaysian government started the implementation of the banking sector reformation in respond to the 1997 financial crisis. Under the reform plan, Malaysian government guided the merger activities in the banking sector through the central bank. Prior to that date, the banking sector was made up of 54 domestic deposit taking institutions which became ten large-capitalized banks by the end of 2002. (Ahmad, Ariff, & Skully,

The Mission statement of the bank is to “help you make progress toward your goals”. Which means to provide simple ways to spend, save and manage the money of the consumers. Nowadays, banks operate in those sectors where the environment is stable but nonetheless many banks are facing aggressive competition but fighting back to the competition is vital role to play to generate

The primary source of data for research is interviews with bank executives. To confirm information collected by primary data, some documents published by banks were used as secondary data. The interviews were recorded and important points were collected. The whole research can be divided into three steps. First is general description of

The results and outcome after the financial crisis over the Banking sector in the UAE & GCC Countries.

This is a multilateral financing organization. It has its headquarters in Jeddah, Saudi Arabia. Islamic Development Bank was formed in the year 1973 by the Finance Ministers of member states. It was formed during the Organization of Islamic Cooperation (formerly known as Organization of the Islamic Conference). The King of Saudi Arabia (Faisal) supported the creation of this organization. The Islamic Development Bank started operating on October 20th, 1975 (Schiavone, 2015). Currently, the bank has 56 member states who are the shareholders of the bank. By the year 2013, the bank decided to triple its authorized capital to $150 billion. This move was meant to better serve non-member countries and Muslim in members. The Islamic Development Bank has a good credit rating of AAA, which it got from Fitch and Standards & Moody’s. A large portion of the paid-up capital of the bank is held by Saudi Arabia. It holds approximately one-quarter of the capital. This bank also plays the role of observer at the United Nations General Assembly.

Islamic banks have a better N.I/ total interest Income by .2063 points, this advantage shows that Islamic banks are more efficient in making money through transactions. Though the advantage on return on assets falls by around one third to only .0120 points, but Islamic banks in regimes still have an advantage over conventional banks in maximizing the utilization of assets. Return on sales for post-crisis period are also greater for Islamic banks, the difference of almost 5.2% shows that Islamic banks have better profitability than conventional banks. Islamic banks are also 24.41% more cost efficient than conventional banks during post crisis period in regimes.

Results indicate that conventional banks perform better in profitability, while Islamic banks perform better in liquidity and credit risk. In t-test of the return on asset (ROA) and total equity to net loans, there are no major difference between Islamic banks and non-Islamic banks. In the return on equity and common equity to total assets, there are statistically significant differences in these two groups. The statistically significant difference was shown in the area of liquidity which means that the Islamic banks liquidity performance has major difference with the non-Islamic banks.

Company Profile |Products |Sell Offers |Buy Offers |Contact Details | |Askari Bank, one of the leading banks of Pakistan. The bank was founded in 1992, and in the 18 years since, our growth and success patterns have far outgrown industry standards. Askari Bank has expanded into a nationwide presence of 150 branches, and an offshore banking Unit in Bahrain. A shared network of over 1,100 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service. As on December 31, 2007, the bank had equity of PKR 12.27 billion and total assets of PKR 182.17 billion, with over 800,000 banking customers, serviced by 6,808 employees. We have reinforced our products with new deposit schemes bearing competitive rates

* With the shift in public policy in the 1980s to consolidate public sector activities and promote the private sector as the engine of growth, a new financing pattern emerged. With this transformation of the economy, the decline of public sector borrowing was compensated by an increase in financing by the private sector. The private sector has relied on the banking system for its financing needs, of which a large portion was intermediated through the banking system - the ratio of bank credit to gross domestic product (GDP) in Malaysia was high at 149% in 1997. Nevertheless, the ratio of bank deposits to GDP was also high at 154% and therefore banks were able to finance their lending operations from their deposits.