RECOVERY NPL - CORRUPTION THROUGH LEGAL FEES

Why are banks in Malaysia seems to be very efficient on proceeding legal suit against default borrowers?
Don't the bank should avoid the account from turning to Non Performing Loan (NPL) by restructuring and giving room to the borrowers for breathing instead of just transferring the account to NPL and hand it over to the recovery department.  Don't bank learned during the 1997 crisis when banks are in financial difficulties due to the Asian Currency Financial turmoil, loans can be restructured despite of the increasing interest rates.  Those actions were done with the instructions from the Government lead by the former Prime Minister, Tun Dr Mahathir Mohamad.  Legal suit was the last resort for borrowers who are unwilling to pay instead of proceeding immediately to those unable to pay.

Banks should professionally clearly define between those UNWILLING and those UNABLE to pay.  However, what happen today is that those bankers are happy to have accounts falling into NPL for few various reasons such as :
1.  To proceed legal suit where corruption will take place that will benefit bank personnel in two ways i.e that legal firm will give a cut on all legal fess charged while proceeding the legal suit. Another reason is to help client get discount later to pay to the bank with some special cut for the recovery officer or manager.
2.  To get high NPL figures for the bank and later when recovery is made, proudly showed to the Board of Directors of the bank that recoveries being made, mitigating that effort were made to recover.  Actual fact the borrowers were just in temporary financial difficulties and borrowers themselves made effort to pay to clear their names from the bad CCRIS system available today.
3.  Comes year-end, the NPL department will try to make high provision of the NPL account and some were purposely wirtten-off, eventhough recovery chances are very high.  This again is for two personal reasons, one is to show high recovery to BOD when client made payment and second reason to get discount of certain percentage of the outstanding amount for the borrower to pay and with certain cut to them personally.

It is seems ridiculous that banks very much prefer to sought to legal suit against default borrowers and incurring penalty interest, further charges and cost to the defaulters account claiming for full outstanding while even the normal monthly instalment were not being able to service, how could the full outstanding be paid.  Banks should sought to negotiations with defaulters to restructure by reducing instalments which they will continue paying at a lower amount instead of not paying at all.

Banks should realise that  not everyday is sunshine.  During bad times, bankers still get their salary, while outside in the market there are people who loose their jobs, paycut and some businessman running loosing business just to keep floating.

Banks should do away with the penalty charges to defaulters, as that will actually inject poison to a sick man.

Banks should not be worst than standing armies killing the public.

CEOs and Successful Entrepreneurs have to coach aspiring entrepreneurs

Many steps of enterprise starting can be taught through formal couses.  But success as an entrepreneur depends on a fairly unusual combination of personality traits and innovative skills, most of which can be honed on the job only.  Hence most novice entrepreneurs need the kind of guidance and critics that the successful CEOs and entrepreneurs provide in the role of mentors.   There can be knowledge, traits and skills particularly relevant to the current environment and these can be articulated better by the current successful businessmen and the persons willing to start new ventures can benefit by being aware of them.  Then only they can start attempts to know more about them and use available learning opportunities.  Even persons who are in the business of coaching new entrepreneurs may come to know new knowledge, traits and skill through the coaching and discussions with the successful business people.

In order to build a good economy in a developing country, those successful CEOs and entrepreneurs must provide a platform for new business people or the younger generation enter into successful business and stay afloat.  As we are fully aware that new small business failed before reaching three years and most collapse during the infant stage.  Without sincere coaching of successful business individual the growth of younger business generation will be very much less except for those where their fathers left a handsome amount of capital where they can mange failures to success.  Otherwise the failures will not stand again.

Beware of Banking System

PROCESS OF RELATIONSHIP

CCRIS  -  Is it a guide or extreme sources of information.  Banks in Malaysia used this useful info like a fool, by using it against the public.  Even with simple negative report or rectified situation is still seen as negative issue.

Utilisation of limit is being taken up almost immediately, however settlements are updated  after about 90 days.

Restructured facilities is been deemed the individual’s financial health is at stake eventhough being regularized after three years.  In the report that showed restructure of facilities, present application will 99% be rejected.  Banking system today is seen to see as though no one shall fall sick.   Banks never learn to nurse their clients instead of injecting poison to kill clients and creating Non-Performing Loans (NPL).  Bankers have reason to create NPL, will be discussed later.

CTOS -  Being used against customers only,  eventhough outdated or inaccurate.  There are banks that rigidly used this info as a masterpiece, not knowing that it is outdated, never updated by their fellow bankers like them from other bank.

BANK CHARGES - Never on reducing trend, always on the increase of reasons and amounts to find ways to charge public.  The bank never learn that their clients should be profitable in order for the bank to stay too.  But today banks are competing among banks to declare higher profits, ignoring that the profits they make are at the expense of their clients.  They never learn through the 1986 and 1990 crisis that if their client is sick, they will be sick too. If their client die, they may die too, if not rescued by authorities.

BANK CREDIT OFFICERS - NOT LOYAL TO BANK OR CLIENTS,  will only process loans when they are are being agreed/promised certain benefits either direct or through portion of legal fees.

CORRUPTION - NO DEAL NO WORK.  Is growing at a fast phase and very alarming. Anti Corruption Agencies should be looking into this matter seriously.  Corruption are through direct dealing and mostly are through percentage of legal fees.  Bar Council make the rule happily to deny discounts to clients had gave room to introduction fees be paid by legal firms to bank officers that give legal cases for new loan or for litigation to be taken on clients.  This is real blood sucking.

LEGAL FEES - APPOINTED SPECIAL ARRANGEMENT LEGAL FIRMS ONLY. Bank officers will not allow client to choose legal firms eventhough from the bank's panel list, as arrangements being made for certain percentage of the legal fees to them.  Bar council made the ruling that clients shall not be discounted of the legal fees, however today the discount are being discounted to the bank officers from the legal firm.  Bar Council and SPRM should audit legal firm fees and check the net left over to the legal firms as compare to the amount charged to loan borrowers.  This standard of corruption is very alarming,  Legal firms that are not willing to give away this portion to the bankers, will have to close shop if they are relying to the business from the banks.

NON-PERFORMING LOANS -  When clients have financial difficulties, bank will not accommodate to judge and negotiate for lower repayment amount, instead will recall the entire loan. Just imagine a client that may need to pay RM2000 for 20 years and had been paying very promptly for the past 10 years and due to unforeseen circumstances face financial difficulties.  Bank will just recall the entire outstanding instead of negotiating for lower monthly instalment.  Would it be logic, that one who is not able to pay the normal RM2,000 had been instructed to pay the entire outstanding amount of may be RM30,000.

RECOVERY - DESPITE OF FINANCIAL PROBLEMS

RECOVERY - BANK WILL NOT ACCOMODATE OR ASISST

RECOVERY NPL - CORRUPTION THROUGH LEGAL FEES

NON-DEDICATED PERSONNELS

BANK - PROFIT ORIENTED

BANK - NO SOCIAL OBLIGATION TO THE COUNTRY

ISLAMIC BANKING PRODUCTS

ISLAMIC BANKING PRODUCTS

in Insurance, Islamic Banking, Retail Banking |

One of the best ways to understand Islamic banking is to gain an understanding of the products that are considered acceptable. Several of these are covered below. The important thing to remember, however, is that, as with the Christian Bible, there are several differing interpretations of what the Holy Quran and the Hadith actually intend. As a result, not all of these products are universally acceptable (particularly those where the return is determinable in advance), but they are a useful guide. A subsequent piece in the series will cover some of the debate in this area.

This is the second in this series.

WADIAH (SAFEKEEPING)

In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. The depositor, at the bank’s discretion, may be rewarded with a ‘hibah’ (gift) as a form of appreciation for the use of funds by the bank. In this case, the bank compensates depositors for the time-value of their money (i.e. pays interest) but refers to it as a “gift” because it does not officially guarantee payment of the gift.

MUDARABAH (PROFIT LOSS SHARING)

Mudarabah is an arrangement or agreement between a capital provider and an entrepreneur, whereby the entrepreneur can mobilise funds for its business activity. Any profits made will be shared between the capital provider and the entrepreneur according to an agreed ratio, where both parties share in profits and only capital provider bears all the losses if occurred. The profit-sharing continues until the loan is repaid. The bank is compensated for the time value of its money in the form of a floating interest rate that is pegged to the debtor’s profits.

MUSHARAKAH (JOINT VENTURE)

This concept is normally applied for business partnerships or joint ventures. The profits made are shared on an agreed ratio, while losses incurred will be divided based on the equity participation ratio. This concept is distinct from fixed-income investing (i.e. issuance of loans).

MURABAHAH (COST PLUS)

This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties. The purchase and selling price, other costs and the profit margin must be clearly stated at the time of the sale agreement. The bank is compensated for the time value of its money in the form of the profit margin. This is a fixed-income loan for the purchase of a real asset (such as real estate or a vehicle), with a fixed rate of interest determined by the profit margin. The bank is not compensated for the time value of money outside of the contracted term (i.e. the bank cannot charge additional interest on late payments), however the asset remains in the ownership of the bank until the loan is paid in full.

This type of transaction is similar to “rent-to-own” arrangements for furniture or appliances that are very common in the United States.

BAI’ BITHAMAN AJIL (DEFERRED PAYMENT SALE)

This concept refers to the sale of goods on a deferred payment basis at a price, which includes a profit margin agreed to by both parties. This is similar toMurabahah, except that the debtor makes only a single installment, on the maturity date of the loan. By the application of a discount rate, an Islamic bank can collect the market rate of interest.

WAKALAH (AGENCY)

This occurs when a person appoints a representative to undertake transactions on his/their behalf, similar to a power of attorney.

QARDUL HASSAN (BENEVOLENT LOAN)

This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed. However, the debtor may, at his or her discretion, pay an extra amount beyond the principal amount of the loan (without promising it) as a token of appreciation to the creditor. In the case that the debtor does not pay an extra amount to the creditor, this transaction is a true interest-free loan. Some Muslims consider this to be the only type of loan that does not violate the prohibition on riba, since it is the one type of loan that truly does not compensate the creditor for the time value of money.

IJARAH THUMMA AL BAI’ (HIRE PURCHASE)

These are variations on a theme of purchase and lease back transactions. There are two contracts involved in this concept. The first contract, Ijarahcontract (leasing/renting) and the second contract, Bai’ contract (purchase) are undertaken one after the other. For example, in a car financing facility, a customer enters into the first contract and leases the car from the owner (bank) at an agreed rental over a specific period. When the lease period expires, the second contract comes into effect, which enables the customer to purchase the car at an agreed price.

In effect, the bank sells the product to the debtor, at an above market-price profit margin, in return for agreeing to receive the payment over a period of time; the profit margin on the lease is equivalent to interest earned at a fixed rate of return.

This type of transaction is particularly reminiscent of “contractum trinius”, a complicated legal trick used by European bankers and merchants during the Middle Ages, which involved combining three individually legal contracts in order to produce a transaction of an interest bearing loan (something that the Church made illegal).

BAI’ AL-INAH (SELL AND BUY BACK AGREEMENT)

The financier sells an asset to the customer on a deferred payment basis and then the asset is immediately repurchased by the financier for cash at a discount. The buying back agreement allows the bank to assume ownership over the asset in order to protect against default without explicitly charging interest in the event of late payments or insolvency.

HIBAH (GIFT)

This is a token given voluntarily by a debtor to a creditor in return for a loan.Hibah usually arises in practice when Islamic banks voluntarily pay their customers interest on savings account balances.

TAKAFUL (ISLAMIC INSURANCE)

In modern business, one of the ways to reduce the risk of loss due to misfortunes is through insurance. The basic idea behind insurance is the sharing of risk. The concept of insurance where resources are pooled to help the needy does not contradict Shariah.
Conventional insurance involves the elements of uncertainty (Al-gharar) in the contract of insurance, gambling (Al-maisir) as the consequences of the presence of uncertainty and interest (Al-riba) in the investment activities of the conventional insurance companies which contravene the rules of Shariah. It is generally accepted by Muslim Jurists that the operation of conventional insurance does not conform to the rules and requirements of Shariah.

Takaful is an alternative form of cover which a Muslim can avail himself against the risk of loss due to misfortunes. The concept of takaful is not a new concept, in fact it had been practised by the Muhajrin of Mecca and the Ansar of Medina following the hijra of the Prophet over 1400 years ago.

Takaful is based on the idea that what is uncertain with respect to an individual may cease to be uncertain with respect to a very large number of similar individuals. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers.

SUKUK (ISLAMIC BONDS)

In keeping with the prohibition of riba, a conventional bond is not permitted. ASukuk bond, however, is asset-backed and the returns on it are not fixed, but are linked to the return on the assets purchased with the proceeds of the issue. 

These asset-based bonds of medium-term maturity have been issued internationally by sovereign and corporate entities. Sukuk paper has the advantage of competitive pricing as a risk-mitigation structure. In 2001, the Bahrain Monetary Agency was among the first central banks to issue this paper, in its case in three- and five-year maturities, with most issues oversubscribed.

Banking Industry

By: EconomyWatch   Date: 9 September 2010

The Banking Industry was once a simple and reliable business that took deposits from investors at a lower interest rate and loaned it out to borrowers at a higher rate.

However deregulation and technology led to a revolution in the Banking Industry that saw it transformed. Banks have become global industrial powerhouses that have created ever more complex products that use risk and securitisation in models that only PhD students can understand. Through technology development, banking services have become available 24 hours a day, 365 days a week, through ATMs, at online bankings, and in electronically enabled exchanges where everything from stocks to currency futures contracts can be traded .

The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their own savings and investments, and interest payments on those amounts. In the case of borrowers, it includes access to loans for the creditworthy, at a competitive interest rate.

Banking services include transactional services, such as verification of account details, account balance details and the transfer of funds, as well as advisory services, that help individuals and institutions to properly plan and manage their finances. Online banking channels have become key in the last 10 years.

The collapse of the Banking Industry in the Financial Crisis, however, means that some of the more extreme risk-taking and complex securitisation activities that banks increasingly engaged in since 2000 will be limited and carefully watched, to ensure that there is not another bankingsystem meltdown in the future.

Mortgage banking has been encompassing for the publicity or promotion of the various mortgage loans to investors as well as individuals in the mortgage business.

Online banking services has developed the banking practices easier worldwide.

Banking in the small business sector plays an important role. Find various banking services available for small businesses.

Banking Industry in Malaysia

The banking industry in Malaysia dates back to the early 1900s when rapid economic development, as a result of thriving profits from rubber plantations and the tin industry then, saw the opening of foreign bank branches and the setting up of Malaysia’s first domestic bank – Kwong Yik (Selangor) Banking Corporation (now Malayan Banking Berhad) in 1913. Since then, the banking industry has continued its steady growth and expansion until eventually there was a need for a governing body to oversee the activities and operations of the numerous banks in the country.  This led to the establishment of Bank Negara Malaysia (Central Bank), a statutory body which is wholly-owned by the Federal Government.

The constitution, functions and powers of Bank Negara are set out in the Central Bank of Malaysia Act 1958.  The objectives of Bank Negara are to: •  Promote monetary stability and a sound financial structure •  Act as a banker and financial adviser to the Government •  Issue currency and keep reserves safeguarding the value of the currency •  Influence the credit situation to the advantage of the country Financial Institutions Those classified as financial institutions in Malaysia constitute commercial banks, Islamic banks, merchant banks, foreign banks’ representative offices, finance companies and discount houses. Following the successful restructuring and consolidation of the banking sector in Malaysia in 2003, efforts have shifted to building the domestic financial infrastructure.  The industry-wide consolidation of the domestic banking institutions resulted in 54 banking institutions being reduced to ten domestic anchor banking groups: Affin Bank, Alliance Bank, AmBank, Bumiputra-Commerce Bank, EON Bank, Hong Leong Bank, Malayan Banking, Public Bank, RHB Bank, Southern Bank.  These banks have finance company subsidiaries. The first round of banking consolidation was initiated by the government when it imposed a RM2 billion capitalization requirement for banks.  The second phase of consolidation from 2004 onwards could involve further mergers of individual banks and finance company subsidiaries as well as mergers among the ten banking groups. Banking Products and Services The evolution of the banking industry in Malaysia has led to conventional banking products and services, such as deposits and loans/hire purchase, taking on more sophisticated and advanced features such as phone banking, phone-a-loan, auto pay, auto debit, ATMs and online shopping and banking.  These features are facilitated by advanced technological developments that allow bank customers easier and simpler methods and processes of going about their daily banking. In addition to improving banking features and methods, it has also led to the introduction of new products and services like credit and debit cards, investment products (insurance and unit trusts), financing products and services (trade and share financing), trade and credit facilities, remittances, loans to priority sectors and Islamic banking. Base Lending Rate/Interest Rates The Base Lending Rate (BLR) is fixed by Bank Negara Malaysia and is derived from the cost of funds which fluctuates depending on the economic conditions of the country.  Thus, if economic conditions are good, the BLR will be higher and conversely, if economic conditions are poor, the BLR will be lower. Since 1983, with the exception of special loans or priority sectors, all loans charged by banks are at a margin (usually between 0.75% and 2%) above the BLR.  This margin is determined by the respective banks depending on the banks’ own cost of funds and the borrower’s credibility.  Bank Negara has presently set the BLR at 6%.  In Islamic banking, the BLR is known as the base financing rate. Apart from the BLR, which covers loans, other interest rates imposed by banks cover all kinds of deposits.  Some banks even offer joint current and savings accounts which also earn interest.  These interest rates are determined by the banks and tend to vary according to the economic development of the country.  Thus during good times you can expect higher deposit rates but, consequently, loan rates would also go up and vice versa. Banking & Financial Institutions Act 1989 (BAFIA) The Banking and Financial Institutions Act came into force on 1 October 1989 and provides for the licensing and regulation of institutions carrying on banking, finance company, merchant banking, discount house and money-broking businesses.  It also provides for the regulation of institutions carrying on scheduled business comprising non-bank sources of credit and finance, such as credit and charge card companies, building societies, factoring, leasing companies and development finance institutions. Lodging a Complaint Against a Financial Institution If your financial institution is unable to resolve your complaint, you can write to Bank Negara Malaysia’s Banking Mediation Bureau, which handles disputes between customers and financial institutions.  All you have to do is write a letter to the bureau stating your complaint and that you were unable to resolve it with your bank.  You will also need to complete a standard form allowing your bank to disclose to the bureau any information on your account required for the purpose of investigating your complaint. The Banking Mediation Bureau handles complaints relating to the charging of excessive fees interest or penalties; misleading advertisements; unauthorized ATM withdrawals; unauthorized use of credit cards; and unfair practices of pursuing actions against a guarantor. After receiving your official complaint, the bureau will conduct a thorough investigation and see how best to resolve your complaint.  It will speak with you and the officers concerned at your bank before coming to a decision based on its findings.  If you choose to accept this decision, the matter is deemed resolved.  However, if you choose to reject the decision, your only other recourse will be the judicial process where you can proceed with taking legal action against your bank.

The Banking System in Malaysia

The banking system, comprising commercial banks, investment banks, and Islamic banks, is the primary mobiliser of funds and the main source of financing which supports economic activities in Malaysia. The non-bank financial intermediaries, comprising development financial institutions, provident and pension funds insurance companies, and takaful operators, complement the banking institutions in mobilising savings and meeting the financial needs of the economy.

1.1 The Central Bank

Bank Negara Malaysia (the Bank), the Central Bank of Malaysia, is at the apex of the monetary and financial structure of the country. The principal objective of the Bank is to promote monetary stability and financial stability conducive to the sustainable growth of the Malaysian economy. Its primary functions as set out in the newly enacted Central Bank of Malaysia Act 2009 are to:

•	formulate and conduct monetary policy in Malaysia;
•	issue currency in Malaysia;
•	regulate and supervise financial institutions which are subject to the laws enforced by the Bank;
•	provide oversight over money and foreign exchange markets;
•	exercise oversight over payment systems;
•	promote a sound, progressive and inclusive financial system;
•	hold and manage the foreign reserves of Malaysia;
•	promote an exchange rate regime consistent with the fundamentals of the economy; and
•	act as financial adviser, banker and financial agent of the Government.

To achieve its mandates, the Bank is vested with powers under various laws to regulate and supervise the banking institutions and other non-bank financial intermediaries. The Bank also administers the country’s foreign exchange regulations.

1.2 Financial Institutions

The following table provides an overview of the number of financial institutions as at end-November 2009:

Financial Institution	Total	Malaysian - Controlled Institutions	Foreign - Controlled Institutions
Commercial Banks	22	9	13
Islamic Banks	17	11	6
International Islamic Banks	2	-	2
Investment Banks	15	15	-
Insurers	40	25	15
Islamic Insurers (Takaful Operators)	8	8	-
International Takaful Operators	1	-	1
Reinsurers	7	3	4
Islamic Reinsurers (Retakaful Operators)	4	1	3
Development financial institutions	13	13	-

Banks, including Islamic banks, operate through a network of more than 2,651 branches across the country. Six Malaysian banking groups have presence in 19 countries through branches, representative offices, subsidiaries and joint ventures. There are also 22 foreign banks which maintain representative offices in Malaysia. They do not conduct normal banking business but provide liaison services and facilitate information exchange between business interests in Malaysia and their counterparts.

Following the announcement in April 2009 of the liberalisation measures for the financial services sector which includes the issuances of new licences and increase of foreign equity limits, there has been great interest by international financial institutions to establish presence in Malaysia. The liberalisation measures aim to strengthen Malaysia's economic interlinkages with other economies and enhance the role of the financial sector as a key enabler and catalyst of economic growth.

1.2.1 Islamic Banking Industry

Islamic banking refers to a system of banking that complies with Islamic law also known as Shariah law. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset.

These principles are supported by Islamic banking’s core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited.

Malaysia has emerged at the forefront in the development of Islamic finance and has a comprehensive and vibrant Islamic financial system which includes Islamic Banking, Islamic Capital Market, Takaful and Retakaful, and Islamic Interbank Money Market. Presently, Malaysia’s Islamic banking assets reach RM281.7 billion (USD82.9 billion at exchange rate of 3.4) with an average growth rate 18-20% annually.

In terms of product offering, more than 60 Islamic financial products and services are available in the market. The emergence of new innovative products and financial instruments that incorporate globally accepted Shariah principles such as musyarakah mutanaqisah home financing, Ijarah sukuk, commodity murabahah deposits and Islamic profit rate swap in the industry have further elevated the domestic Islamic financial sector to the next stage of advancement.

1.2.2 Development Financial Institution

Malaysia has several development financial institutions (DFIs) that were set up with specific objectives to develop and promote strategic economic sectors, including the manufacturing, agriculture, infrastructure and maritime sectors, small and medium enterprises (SMEs), as well as sectors that are export oriented.

These DFIs complement the banking institutions by providing a range of specialised financial and non-financial products and services to suit the needs of the targeted strategic sectors. These include the provision of medium to long-term loans, equity capital, guarantees for loans and a range of supplementary financial and business advisory services. Currently, six DFIs have been placed under the purview of the Development Financial Institutions Acts 2002 and regulated by the Bank to enhance the overall performance, efficiency and effectiveness in delivering their mandated roles.

1.3 Malaysia International Islamic Financial Centre

In August 2006, the Malaysia International Islamic Financial Centre (MIFC) initiative was launched to promote Malaysia as a major hub for international Islamic finance.

The MIFC initiative comprises a community network of financial and market regulatory bodies, Government ministries and agencies, financial institutions, human capital development institutions and professional services companies that are participating in the field of Islamic finance.

This market vibrancy is reflected by the continual innovation in providing a wide range of Islamic financial instruments, and growth in the number of domestic and international financial institutions. It is further supported by thought leaders and a robust legal, supervisory and regulatory framework coupled with strong Government support, and global Shariah best practices to conduct Islamic finance activities such as Sukuk Origination, Islamic Fund and Wealth Management, International Islamic Banking, International Takaful and Human Capital Development, while enjoying attractive incentives.

The establishment of the MIFC as one of the key intermediation linkages in the global market place, has an important role in accelerating the bridging process and strengthening the relationship between international Islamic financial markets and thereby expand the investment and trade relations between the Middle East, West Asia and North Africa with East Asia. Situated centrally in the Asian time zone, Malaysia presents itself as a meeting place for those with surplus funds and those who seek to raise funds from any part of the world.

The MIFC initiatives aims to position Malaysia as the Islamic financial hub through five focus areas:

i.	Sukuk Origination
	A platform for government agencies, multinational corporations and multilateral development banks and financial institutions across the world to originate sukuk out of Malaysia. Sukuk (plural of sakk) or Islamic bonds is the most popular component in Islamic Finance among Muslim and non-Muslim consumers alike.
	Sukuk refers to trust certificates or participation securities that grant investors a share of the asset including the cash flow and risks that commensurate from such ownership. Similar to financial bonds in the conventional financial industry, sukuk are proof of ownership title and are utilised by financial institutions to raise cash.
ii.	Islamic Fund and Wealth Management
	A destination for fund managers to establish Islamic fund management operations in Malaysia with a wide range of world class capital market and treasury instruments.
	Islamic fund and wealth management is the professional management of Shariah-compliant securities and assets based on Islamic principles to achieve set financial goals. The scope of activity involves financial analysis, asset and securities selection, investment planning and ongoing monitoring of investment funds. Both individuals and institutions may become Islamic wealth and fund managers through the provision of related services.
iii.	International Islamic Banking
	A centre for financial institutions to establish Islamic banking operations in Malaysia to conduct foreign currency business.
iv.	International Takaful
	A centre for financial institutions to establish takaful (Islamic insurance) operations in Malaysia to conduct foreign currency business.
	Takaful is a concept whereby a group of participants mutually guarantee each other against loss or damage. Each participant fulfils his or her obligation by contributing a certain amount of donation (tabarru) into a fund, which is managed by a third party – the takaful operator.
v.	Human Capital Developement
	A centre of excellence and thought leadership in education, training, consultancy and research in Islamic finance to supply talent for the Islamic finance industry globally.

Major incentives introduced under the MIFC initiative include:

i.	Issuance of International Islamic Banking (IIB) licences under the Islamic Banking Act 1983 to qualified foreign and Malaysian financial institutions to conduct the full range of Islamic banking business with residents and non-residents in international currencies either as a subsidiary or a branch. The entity will enjoy full income tax exemption for ten years up to year of assessment 2016 under the Income Tax Act 1967.
ii.	Issuancther as a subsidiary or a branch. The entity will enjoy similar income te of International Takaful Operator (ITO) licences to qualified foreign and Malaysian financial institutions to conduct full range of takaful business with non-residents and residents in international currencies, eiax exemption as the IIB entity
iii.	Islamic fund management companies (IFMC) are allowed to invest all their Shariah funds abroad. The entity will enjoy tax exemption on all fees for managing Islamic funds for foreign and Malaysian investors up to year of assessment 2016 under the Income Tax Act 1967.
iv.	Up to 100% foreign equity ownership is allowed for IIB, ITO and IFMC.
v.	Tax deduction on expenses incurred in the issuance of Islamic securities approved by the Securities Commission until year of assessment 2015.
vi.	Stamp duty exemption on instruments used to issue sukuk in any currency until year of assessment 2015.
vii.	Tax exemption and withholding tax exemption on interest or profits received by non-resident investors from investment in Islamic securities issued in any currency, other than convertible loan stock, approved by the Securities Commission.

Islamic financial services are also available in the Labuan International Business and Financial Centre (Labuan IBFC).