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Humanising Finance
July 2017
Islamic Banking
     

Benefits of Islamic Banking

According to a news article published in June in Berita Harian, there has been an increase in Singapore customers who are interested in Islamic banking as an alternative to conventional financial products, and customer queries continue to grow at a steady pace. One of the main driving factors is that a rising number of customers are seeing that Islamic banking can offer competitive value compared to conventional products.

In this issue of Humanising Finance, we offer you a glimpse of what Islamic banking is and how it may benefit you.
 
 
What is Islamic banking?
This refers to a banking system that complies with Islamic law, also known as Shariah law. Shariah is the legal framework that regulates the entire ecosystem including banking.

Shariah law allows for all types of economic activities unless there is a clear prohibition. The prohibited activities include the following:
 
  • Financial services based on interest (riba)
  • Gambling and gaming
  • Excessive uncertainty
  • Manufacture or sale of non-halal products, e.g. liquor and non-halal meats
  • Conventional insurance
  • Entertainment activities which are not permitted by Shariah, e.g. adult entertainment
  • Stock-broking or share trading in securities not approved by Shariah
 
Contrary to popular belief, Islamic banking is not just for Muslims. It seeks to lay the foundations of a fair financial system and is appropriate for everyone, regardless of race and religion.
 
How can you benefit from Islamic finance?
  • Greater transparency

Shariah law requires that all Islamic financial and business transactions be based on transparency, accuracy, and disclosure of all necessary information so that one party does not have advantages over the other party. The transparent nature of their dealings is supposed to make everything clear-cut and easy to understand with little room for surprise payments or hidden fees.

  • Non-compounding of late payment charges

Compounding of late payment charges is prohibited for Islamic financing products. When an Islamic financing product goes into arrears, the late payment charges will only be applied on the customer's outstanding balance that is due and payable; it excludes any late charges that may have been incurred on a prior basis.

 
  • Clarity on maximum amount payable

For sale-based Islamic financing products, such as auto-financing and property financing, the maximum amount to be paid by the customer will be determined upfront, so customers can be assured that the amount they pay will never exceed a stipulated maximum amount.

  • Upfront profit for Islamic fixed-term deposit

Customers can enjoy the advantage of getting upfront profit for placements of Islamic fixed-term deposits.

For example, Maybank Singapore Dollar Term Deposit-i is an Islamic fixed-term deposit based on the Islamic financial principle of 'Murabaha' and involves a customer purchasing an approved Shariah-compliant commodity and selling the commodity to the bank at a marked-up price.

The customer will be paid profit from the sale upfront and the principal will be paid by the bank upon maturity.

   
 
Maybank has been voted as Singapore's Best Islamic Bank by Global Finance from 2013 to 2015 and for 2017. We currently offer a range of Islamic banking products from deposits to financing catering to individuals, SMEs 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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