Interest-free banking counters in conventional banks in Malaysia: prospects and issues

On March 4, 1993, three conventional banks in Malaysia were allowed to open interest-free (Islamic) banking counters in addition to their other practices. Since the 1980's , there have been institutions that offer non-interest services. At this point, however, the Islamic institutions' place in the market is quite small. Since Muslims consider interest to be wrong, the demand for non-interest services can rise. The non-participation in the banking system by certain Muslims can hurt the development strategy of the country. An integrated Islamic system needs to be set up. Bank Islam (BIMB) is the only institution offering only Islamic services. Its personnel can provide valuable consultancy to other firms. As competition aroung BIMB grows, the organization is looking towards Muslims who thus far have avoided banks. Government support for Islamic finance in Malaysia is seen as strong. Still, Islamic money and capital markets' development is in order.