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Humanising Finance
December 2016
     

Clearing Misconceptions On Islamic Banking

Have you come across the term "Islamic banking" before? Have you wondered what it is and if it might be suitable for you?

Here is some basic information on what is Islamic banking and also some common misconceptions about it.
 
 
What is Islamic banking?
Islamic banking refers to a banking system that complies with Islamic law, also known as Shariah law. Shariah law allows for a wide range of economic activities, except those relating to prohibited activities which among others include the following:
 
 
  • Share trading/stock brokingĀ on Shariah non-compliant shares
  • Conventional banking
  • Conventional insurance
  • Gambling e.g. lottery, betting
  • Liquor and liquor-related activities, pork and pork-related activities, and other non-halal food and beverages
  • Tobacco and tobacco-related activities
  • Other activities deemed non-compliant according to Shariah
Common misconceptions
Misconception 1: Islamic banking products are only for Muslims
 
Many often think that Islamic banking products are for Muslims, but that is incorrect. There is actually vast participation and support of Islamic finance by non-Muslims in many countries such as the UK, US, Germany and also in Asia such as Singapore and Hong Kong.
 
  • For Individuals

There is no prohibition for non-Muslim individuals to open Islamic banking accounts, take up Islamic banking financing products or conducting Islamic banking services.

  • For Companies

As long as the purpose of financing and the nature of business do not contravene with Shariah, companies are allowed to utilise/apply for Islamic banking services/facilities. This is evidenced by several established blue chip companies like Nestle, Shell and General Electric Co. who have raised their funds through issuance of Islamic bonds (sukuk).

Maybank is one of the largest Islamic financial institutions in the Asia region, and has been offering a growing range of Islamic banking products from deposits to financing, catering to individuals and companies. Find out more here.

   
Misconception 2: Islamic banking is a replica of conventional banking

Although Islamic banking and conventional banking both share a common overall objective of providing financial services, there are in fact several commercial differences which make Islamic banking products more attractive to customers.

  • Compounding of late payment charges is prohibited under Islamic financing products.
  • For some Islamic financing products, the maximum amount to be paid by the customer will be determined upfront, so customers can be assured that what they pay will never exceed a stipulated maximum amount.
  • For Islamic term deposit products, returns are paid upfront instead of upon maturity.
 
 
Maybank has been voted as Singapore's Best Islamic Bank by Global Finance from 2013 to 2015. We currently offer a range of Islamic banking products from deposits to financing catering to individuals, SME and corporates. Find out more about our Islamic banking products by calling our customer relationship executives on 1800 629 2265 (1800-MAYBANK) who can advise you further.
 
Always wanted to find out more about a finance-related issue? Email us at: corporateaffairs@maybank.com.sg
 
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