At the end of this chapter, you should be able to:
1 Understand the development of Islamic finance in Malaysia.
2 Understand the development of the Islamic capital market in Malaysia.
Over the past few decades, the Islamic financial industry has rapidly expanded worldwide. While it is difficult to exactly date the establishment of the first formal Islamic financial institution in recent history, references are often made to the Mitghamr Egypt Savings Association, founded in 1963.1 Though the bank is still active, under the new name Nasser Social Bank, its objectives are more social than commercial.2 Moreover, Mitghamr is a group-initiated bank, operating without any support from the Egyptian government. Therefore, when we discuss which country has hosted the modern development of Islamic financial institutions, we will come across Malaysia and Pakistan. Malaysia is the pioneer of modern Islamic finance development through the establishment of Tabung Haji in the mid-1960s.
Malaysia is currently known as one of the leading countries in the world for Islamic financial development. According to PricewaterhouseCoopers Malaysia,3 Islamic banking assets in Malaysia were reaching US$30.9 billion while Takaful assets were around US$1.7 billion at the end of 2010. Moreover, Malaysia also has the largest Islamic private debt securities ...