Malayan Banking Bhd (Maybank) is confident of growing its Islamic finance business despite not having an Islamic banking subsidiary by launching more innovative products, its head of Islamic banking Ibrahim Hassan said.
He said the bank, which had been offering Islamic products through its Islamic banking window since 1993, would continue to diversify its product base in order to become more competitive.
“We have been able to grow the business over the years based on the window concept and we will continue to grow. There is no hindrance to grow the business via the window concept,” Ibrahim told reporters after the launch of three new Islamic banking products and the Riang Ria Raya campaign here yesterday.
The three new products are net Current Account-i, HomeEquity-i and Shophouse Equity-i.
Ibrahim said the net Current Account-i was the first Syariah-compliant current account in the country that is Internet-based. It offers customers the convenience of a checking facility with a combination of online features and takaful cover while giving them dividends at the same time.
He said HomeEquity-i and ShophouseEquity-i were based on the diminishing co-ownership or Musyarakah Mutanaqisah (MM) concept that would allow customers and the bank to form a partnership to jointly own the underlying property.
Under MM, each party would obtain its respective shares based on the ratio equivalent to the capital raised, he added.
The bank will then lease its share of the property to the customer and the latter will gain ownership of the bank’s share by making monthly payments over an agreed duration of time.
“The customer will ultimately become the sole owner of the property as the bank’s share gradually diminishes,” he added.
Ibrahim said MM was different from what was currently in the market today as the main product offering by financial institutions for the financing portfolio was generally Bai Bitham an Ajil (BBA).
“However, to meet the requirements of compliance in other regions especially the Middle East, the globally accepted concept of MM was introduced,” he added.
Conceptually, BBA was a sale-and-purchase transaction as the bank purchases an asset for cash and sells it to the customer on a deferred payment basis, Ibrahim said, adding that the sale price included the bank’s profit margin as agreed upon by both parties.
MM, however, was a partnership to jointly purchase and own an asset as both the bank and customers take up equity in the partnership, he added.
Maybank is the largest Islamic banking operator in Malaysia with assets of RM23.9 billion. Its outstanding Islamic loans reached RM19.14 billion in its previous financial year ended June 30, 2007, comprising 23.5% of the market share.