Islamic Banking

2. Company Background: BIMB

In MIBS, the Islamic banks normally obtain more than 75 percent of their funds from deposit (Abdul Ghafar, 2010). The heavy reliance to deposits as source of funds for BIMB, as the focus of this study is shown in the comparison of 3 years (2008-2010) of its balance sheet below:

Table 1: BIMB Balance Sheet, 2008-2010 (RM Billion)

Financial Year 2008 2009 2010

Assets

Cash/Bank Balance 9,947 8,492 2,762

Government Securities 362 140 10

Inter Bank Assets 247 100 413

Total Net Financing 9,055 9,662 11,861

Investment 3,734 9,089 15,432

Associates 0 0 0

Fixed Assets 214 185 220

Goodwill 0 0 0

Other Assets 361 311 334

Total Assets 27,582 31,923 35,491

Liability & Shareholders' Funds

Customer Deposits 20,536 24,877 26,798

Inter Bank Deposits 58 8 378

Debts/Borrowings 0 0 0

Others 1,387 727 735

Minorities 934 1,094 1,466

Shareholders' Funds 1,005 1,272 1,655

Total Liability & Shareholders' Funds 27,582 31,923 35,491

% Customer Deposits to Total Liability & Shareholders 74.45 77.93 75.51

Source: BIMB Annual Report (2008 – 2010)

Indeed, customer deposits are very crucial in the operation of BIMB since it is the major contributor for source of fund in financing activity. Hence, BIMB needs to be creative and innovative within the parameter of shariah compliancy to compete in inducing potential customers. One of the marketing strategy not employed by BIMB (before the introduction of Al-Awfar savings and investment product in 2009) was prize-giving of valuable/luxurious goods or cash. Back then, the prize-giving products in Malaysia banking industry was synonym to the huge success of PSC offered by BSN. In 2007, the total depositors of PSC reached more than 1.3 million with overall savings worth almost RM900 million (Fuad, 2011).

But, PSC has drawn lots of controversies by the way it was implemented revolving the shariah compliant issues. BSN has not listed PSC under their shariah based products but according to the 79th Conference (Muzakarah) of the Fatwa Committee of the National Council for Islamic Religious Affairs Malaysia held on 6th - 8th September 2007 has agreed with the previous ruling issued by the Fatwa Committee National Council of Islamic Religious Affairs Malaysia held on 29th December 1991 that "the BSN Premium Savings Certificate is in accordance to the Shariah". But, the Committee has also advised the BSN to amend any current practice in such system if it is contradictory to Shariah.

As pioneer of full-fledge Islamic banking in Malaysia, BIMB has the reputation to be preserved and any controversies of its product will bring severe impact on the image not only confine to BIMB but Malaysia as the hub of Islamic banking. Since its inception in July 1983, BIMB has not only become the symbol of Islamic banking in Malaysia but has also played an integral role in setting the stage for a robust growth of the country's Islamic financial services industry. As the flag bearer of the industry, BIMB continues to pave a future of unparalleled innovation and unlimited possibilities in Islamic finance.

BIMB has grown from strength to strength over the years. From the seed capital of only RM80 million initially, BIMB's shareholder funds swelled to RM2.5 billion as at December 2010, a testament to its successful long-run growth plan. Today, BIMB parades a wide-ranging list of more than 50 innovative and sophisticated Islamic financial products and services as well as a fast growing network of 119 branches and more than 1000 self-service terminals nationwide (BIMB, 2010).

In recognition of its prominence in the industry, BIMB was awarded the Reader's Digest Platinum Award for being the Most Trusted Brand for Islamic Financial Services for three consecutive years, namely in 2009, 2010 and 2011– a significant milestone in its journey towards becoming "the global leader