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Protection of investment account holders in Islamic banks in Malaysia: legal and accounting in Malaysia

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Date
2017
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Abstract
The Islamic banking industry in Malaysia is governed by the Islamic Financial Services Act 2013 (IFSA). This legislation marks another step in the evolution of the Islamic banking industry in Malaysia. Among its unique components, it re-classifies deposittaking products into two, namely Islamic deposits and investment accounts. The distinction has brought about a significant impact on the role that Islamic banks have traditionally been playing. The move from purely a credit intermediary to a mixed credit-and-investment intermediary is expected to promote real economic growth and development. In IFSA, investment account is defined as an account under which money is paid and accepted for the purposes of investment. This must be in accordance with the Shariah on terms that there is no expressed or implied obligation for the Islamic bank to repay the money in full or with any profit. This definition is instrumental as it explicitly distinguishes the character of an investment account from an Islamic deposit account as the latter guarantees return of the capital with or without a profit. This definition embeds statutorily the true spirit of Shariah-compliant investments, namely profit and loss sharing in musharakah, profit sharing and loss bearing in mudarabah and fee-based in wakalah bil istithmar.
Keywords
Islamic banks , Investment account , Islamic Financial Services Act 2013 (IFSA) , Malaysia
Citation
Kasri, Noor Suhaida and Ahmed, Mezbah Uddin. (2017). Protection of investment account holders in Islamic banks in Malaysia: legal and accounting in Malaysia. ISRA Islamic Finance Space, Issue 9 (December 2017). pp. 30-33.
Publisher
ISRA Consultancy Sdn Bhd
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