Islamic Revivalism Movement Towards the Establishment of Islamic Banking and Finance in Malaysia

Topics: Islamic banking, Sharia, Islam Pages: 5 (1886 words) Published: October 12, 2011
Islamic Revivalism Movement Towards The Establishment Of Islamic Banking And Finance In Malaysia

Islamic revivalism refers to a revival of the Islamic religion throughout the Islamic world, that began roughly sometime in 1970s and is manifested in greater religious piety, and community feeling, and in a growing adoption of Islamic culture, dress, terminology, separation of the sexes, and values by Muslims. It has been defined by some of the Muslim scholar as the cleansing in an effort to return Islam to its original pure form. One striking example of it is the increase in attendance at the Hajj, the annual pilgrimage to Mecca, which grew from 90,000 in 1926 to 2 million in 1979 (Kepel, Gilles, Jihad: on the Trail of Political Islam, Harvard University Press, 2002) The emergence of the Islamic revivalist movements in Malaysia in 1970 was spawned by the global Islamic resurgence and internal fissures or cracks in the Malay Muslim community. There has been an intensification of Islamic activities since the 1970s which include the establishment of Islamic banking and finance. The process of Islamization in Malaysia started in line with the concept of Islam as Ad-deen, a way of life in this world and the Hereafter, every ibadah commanded by Allah S.W.T. is of benefit in this and the next world. Since the beginning Muslims are obligated to perform the Hajj pilgrimage. And Muslims have to find enough money for the journey to the Holy Land. To avoid riba' (usury) which is haram (forbidden) in Islam, Muslims resort to various traditional methods of saving. Of course, there are those who dispose their animals or inherited properties for cash to cover their Hajj expenses, a practice which ultimately imposes economic burden on themselves and their families while they are on the pilgrimage or when they return from the pilgrimage. Such practice also does not augur well for the rural economy, besides retarding the country’s economic growth. This effort is seen to be the first attempt by the Malaysian government in the establishment of Islamic finance. The government has set up the Perbadanan Wang Simpanan Bakal-bakal Haji in 1962 and began its operation on 30 September 1963. The corporation to manage the savings of Muslims intending to perform Hajj pilgrimage without involving in activities deemed haram in Islam. This corporation now is known as Tabung Haji. In the same year of operation of the corporation, the first experiment in Islamic banking was set up undercover in Mit Ghamr, Egypt. The model for the experiment was the German Savings bank modified to comply with Islamic principles, i.e. it was barred from charging and paying interest. Nevertheless, the charter of the Bank did not refer to Shariah. This was the results of elementary concepts of modern Islamic banking in the mid 1940s and the appearance of models for Islamic banking in the mid-1950s. The second Islamic Conference of Foreign Ministers in 1973 adopted a document on the "Institution of an Islamic Bank, Economics and Islamic Doctrines". In 1974, the Islamic Development Bank (IDB) was established as a result of this conference. The member states of the OIC became members of the IDB. The IDB helped to establish a number of Islamic banks in various countries. Beginning in 1974, several Islamic banks have been established which include: Dubai Islamic Bank in 1975, Faisal Islamic Bank of Sudan in 1977, Faisal Islamic Egyptian Bank and Islamic Bank of Jordan in 1978, Islamic Bank of Bahrain in 1979, the International Islamic Bank of Investment and Development, Luxembourg in 1980. The issue of Riba has long been a problem for Muslims. Even what constituted Riba itself has been a subject under serious discussion. The existence of Riba has been argued to be a major factor for the low participation of the Malays in the economic activities of Malaysia. At the outset, the most important departure of Islamic banking from conventional banking is the prohibition of Riba, and...
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