Debunking the Common Myths about Islamic Banking
Malaysia is moving forward as one of the global Islamic finance hubs across the globe where many Shariah compliance products and services have been introduced. According to The Sun Daily, the Economic Outlook 2021 report issued by the Ministry of Finance (MoF), it illustrates that the Islamic banking industry in Malaysia has expanded with total assets valued at RM1.03 billion and the total outstanding Islamic financing has increased to RM787.8 billion.
Despite a huge number of Malaysians have embarked their financial journey with Islamic Banks but the myths or misconceptions about Islamic banking still becomes a debate.
Amongst the popular myths are; Islamic banking is limited to those people who are professing the religion of Islam, there is no difference between Islamic banks and conventional banks and Islamic banks is a charitable organisation.
First and foremost, Islamic Financial Institutions (IFIs) operates in accordance with the principles of Shariah law; the practice of usury (riba'), ambiguity (gharar), speculation (maisir) and oppressive economic activities are prohibited. It is plausible that certain non-Muslims are under the impression that Islamic banking are only for Muslims. However, there is no such prohibition under the Shariah or stated by Shariah Advisory Council (SAC) of Bank Negara Malaysia (BNM) that products and services under IFIs are only for Muslims.
Secondly, the conventional bank charges interest but in Syariah, it is called usury. On the same note, the IFIs earn money by charging profit. IFIs are required to invest together with the customer to finance their needs, rather than lending money to their clients. Moreover, in conventional banking, the term used when a customer accepts a sum of money from the bank is called ‘loan’ whereas, in Islamic banking system, it is called ‘facility’.
Thirdly, there is a misconception that IFIs are charitable organisations, in which they are not. It cannot be denied that the IFIs must pay compulsory zakat because they run the business and these zakat payments will be given to the needy. However, the most accurate statement is the IFIs are conducting a business whereby the profit is an element of which the conducts of the IFIs will be based on to create return for its investors.
In conclusion, there are various advantages of the services and products offered by the IFIs. Shariah Advisory Council (SAC) also keeps striving for improvement to ensure the Islamic banking system in Malaysia is marketable, comprehensive and at once, complies with Shariah principle. Thus, it is very unfortunate if these myths are not debunked to avoid further disputes about the IFIs.