1. What is Islamic Banking?
Islamic Banking is an activity that is consistent with Islamic Law or Shariah. The activity is carried out in accordance with the rules of Shariah.
2. Is Islamic Banking meant for Muslims?
Islamic banking is available for all individuals of all religious beliefs.
3. What are the differences between Islamic and conventional banking? The most important difference is the prohibition of interest. Islamic banking activity must comply with Shariah principles and avoid prohibited activities such as gharar (excessive uncertainty) and maisir (gambling).
4. How do Islamic banks reward their depositors since payment of interest is not allowed? Shariah allows a profit sharing arrangement between the bank and the depositor. Profits from Islamic banking activities will be shared between the bank and the depositor based on the agreed profit sharing. Shariah also allows the bank to give hibah (gift) to its depositors based on its direction.
5. Does the operation of Islamic Bank fully comply with the requirements of Shariah? All products and services offered by Islamic Bank are fully approved by Shariah Advisory Committees (SAC) of Bank Negara Malaysia.
6. Can an IBS bank transfer credit balances of a customer’s Islamic account to a conventional account, or vice versa? Yes, upon request. And IBS bank may transfer funds from an Islamic account to a conventional account.
7. What is the concept of Wadiah (Safe keeping)?
A person deposits funds in the bank and the bank guaran- tees refund of any part or the whole amount of the deposits when requested by the depositor.
8. What is the concept of Mudharabah (Profit Sharing)?
Mudharabah is a profit sharing arrangement or agreement between a capital provider and an entrepreneur. The
entrepreneur is provided with funds by the capital provider to undertake a business activity. Any profits made will be shared between the capital provider and the entrepreneur according to the pre-determined profit-sharing ratio.
9. What is the concept of Musyarakah (Joint Venture)?
This concept is normally applied for business partnerships or joint ventures. The profits made are shared on an agreed ratio.
10. What is the concept Murabahah (Cost Plus)?
The selling of goods at a price that includes a profit margin agreed by both parties. The purchase and selling price, other costs and the profit margin must be clearly stated at the time of the sale agreement.
11. What is the concept of Wakalah (Agency)?
This is the situation when a person appoints a representa- tive or delegates a duty to another party to undertake transactions on his behalf.
12. What is the concept of Qard (Interest-free Loan)?
A loan extended on a goodwill basis and the borrower is only required to repay the amount borrowed.
13. What is the concept of Ijarah Thumma Bai’ (Hire Purchase)? There are two contracts involved in this concept: Ijarah contract (leasing/renting) and Bai’ contract (purchase). The contracts are undertaken one after the other. When the leasing period ends, the Bai’ contract comes into effect or to enable the customer to purchase the car from the owner at an agreed price.
14. Why Islamic Banking?
Islamic banking was launched to cater to the needs of customers for Islamic products and to support the Govern- ment to promote Malaysia as the hub of Islamic finance in the world. In addition, Islamic banking products will ensure that the customer will secure long-term financing against fluctuation of interest rates.
15. Is shaking hands a must in Islamic transaction “aqad”? No need to shake hand to complete the aqad.
16. Who can sign the Islamic agreement?
Anybody who is allowed by law can sign the agreement, regardless of whether he or she is mute, blind or deaf, Muslim or non-Muslim.
17. How is the calculation of early settlement?
The calculation of payment for early settlement is the same as conventional. Customer tell the date of settle- ment, the bank will calculate the amount of rebate to be given.
18. Why agreements in Islamic personal financing are different from conventional banking? Islamic personal financing is not a loan transaction. It is a financing facility using Islamic contract of Bai Inah, which involves selling and buying of asset to create cash. That is why the sale price in the sale agreement and the purchase price in the purchase agreement exist.
19. Who can market Islamic products?
Anybody who is authorised by the bank can market Islamic products.
20. Is the fund used by the bank ‘halal’?
All funds used to finance Islamic products are 100% halal.
21. Who monitor operation of Islamic banking products? Operation of Islamic product is monitored by a committee set up by the bank headed by Head of Islamic Operation Unit (Muslim). Appointed Shariah Committee will also regularly monitor the same and will be conducting Shariah compliance review, minimum once a year.
22. Can the selling price exceed 100% of the purchase price? Selling price can reach more than 100% of the purchase price (facility amount).
23. Why should I choose Islamic products?
If I am a Muslim, I have to choose Islamic products because Islam prohibited interest. It is a big sin to get involved with interest. If I am non-Muslim, the product is transparent, ethical and always at par or better than conventional products.
24. What is debt in Islam?
Debt is something that needs to be paid before you die.
25. Why is there a penalty charges (compensation charges) of 1%?
A compensation charge of 1% is chargeable to customer who does not pay their monthly installment on time. It is to cover the administrative cost incurred by the bank to send notices to customers.
26. Can an individual customer who is involved in gambling activities apply for Islamic products? No problem. If the customer is a Muslim, please remind him that gambling is haram.
27. What is riba?
Riba is interest or usury which is strictly prohibited in Islam.
28. Is the agreement void if incorrect terminologies are spotted? Court will decide. So, please ALWAYS use correct terminologies.
29. Which Court handles Islamic banking litigation cases? High Court (Civil).
30. What is the status of guarantor in Islam?
The liability of a guarantor is exactly the same as the debtor/customer.
31. What is restructuring and rescheduling in Islamic banking? Restructuring is a process where new contracts must be executed again. Rescheduling is a process where the sale price remains the same while the tenure and amount of installment may be changed as agreed by both parties.
32. Which part of the outstanding amount can be restructured? Only principal amount can be restructured.