Are Foreign Conventional Banks Capable of Adopting Islamic Banking: A Study to Investigate the Issues and Challenges Faced Foreign Islamic Banks in Malaysia.
Muhamed Saeed Baashar, Yahya Abd Elwahab (2010) Are Foreign Conventional Banks Capable of Adopting Islamic Banking: A Study to Investigate the Issues and Challenges Faced Foreign Islamic Banks in Malaysia. [Dissertation (University of Nottingham only)] (Unpublished)
Malaysia has witnessed a remarkable growth of Islamic banking industry in the last four decades. It has established its first full-fledged Islamic bank, Bank Islam Malaysia, in 1983. Accordingly, Malaysia is one of the first Islamic countries that place a profound focus on the industry of Islamic banking. The world‟s Islamic banking experiment begun in modern era Egypt - in Mit Ghamr – through the establishment of the Savings Bank first in the 1960s by Dr. Ahmed Al-Najjar. Consequently, the Islamic banking industry began its inception in a practical and tangible way with the establishment of the Islamic Development Bank in 1974, and Dubai Islamic Bank, which was founded one year later; as well as Kuwait Finance House in 1977. Islamic banking began developing its identity, business and growth through its wide spread in the Islamic world. Being an Islamic nation, Malaysia's has always had immense interest in Islamic financial industry. At the level of her central bank – Bank Negara Malaysia – necessary legislations were passed to enable existing conventional and Islamic banks along with Islamic financial institutions to exercise their activities smoothly. The number of Islamic banks has progressively increased in Malaysia (Islamic banks and Takaful insurance institutions) during these past years. Such support by the government has encouraged several global conventional banks to provide Islamic banking services in Malaysia, such as OCBC, Citibank, Standard Chartered Bank, and HSBC (www.bnm.gov.my). Despite Islamic banks growth that the world has witnessed, prior studies conducted by many scholars in this field show that Islamic banks have faced several pertinent issues and challenges around the world. Some are similar globally while others are locally specific. This study aims to investigate whether the frequent problems and issues faced by full-fledged Islamic banks are comparable to issues faced by foreign conventional banks that take on Islamic banking, particularly in Malaysia. It also aims to identify and show that such foreign banks may be facing different issues and challenges via several in-depth interviews conducted with the Senior Management of two selected foreign banks that offer Islamic banking in Malaysia. In addition, the study presents the implications for Islamic banks mangers and Islamic banking policy makers to overcome such identified and highlighted issues.
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