1.

Explain DUAL BANKING SYSTEM in Malaysia and in the US

In my opinion, dual banking system refers to the conventional banks and
Islamic banks. This is the definition that I gave in which the two countries,
namely Malaysia and the U.S. is to use the dual banking system in their
respective countries. Here we can see the similarities and information Dual
Banking System in Malaysia and also in the U.S.
Malaysia
When Islamic banking was being introduced in Malaysia in the 1980s, the
basic strategy was one of replication, essentially transforming the sources
and application of funds of conventional banks into products acceptable to
Islam
Malaysia is a country unique in the Islamic banking system as adopted the
dual banking system is conventional and Islamic bank. Although
conventional banks have long been established in advance of the Islamic
bank, it does not affect significantly the operations of both banks is
practiced in Malaysia and give effect good for both banks in developing
banking operations in line with the competition. this case we can see
where the unique dual banking system in Malaysia where, conventional
banking are allowed to offer Islamic banking and finance products along
with the conventional products. This dual banking system provides an
interesting ground to investigate the efficiency of domestic and foreign
banks. This is not surprising when Malaysia became a national model for
non-Islamic countries in the implementation of the dual banking system as
previously Malaysia implement the dual banking from other countries.
US
By dual banking we mean the United States system under which banks
are chartered either by a state or by the federal government and are
regulated, depending upon the particular situation, either by one or by
both. In the modern day, as a practical matter every bank, even if
chartered by a state, will be regulated to some extent by the federal
governmentthe price of having its deposits federally insured. Dual
banking has been fundamental to this countrys approach to banking and
has existed virtually since
the Revolution.
There had been agitation for banking reform in the United States for many
years prior 1913. This agitation was concerned principally with the need
for an elastic currency, central banking facilities, the development of a
discount market, the abolition of the independent treasury system, and
the introduction of improved methods of clearing and collecting checks. It
was recognized that the dual system of independent unit banks, chartered
and supervised in part by the Federal Government and in part by the
various State governments, complicated the providing the much needed
banking reforms but apparently it was not fully realized by the proponents
of new legislation to what extent the competition between national and

State banks would influence the formulation of measures for banking

reform of the operation of th0se adopted.
2. THREE (3) phases of Malaysian Islamic banking system development
The development of the Islamic banking in Malaysia has undergone four
distinct phases.
i.

ii.

iii.

iv.

The first phases involved the establishment of Islamic financial

institutions under the specific purview of Islamic Banking Act, 1983.
With the introduction of section 124 of the Banking and Financial
institutions Act, 1989.
The second phase of the development of Islamic banking market in
Malaysia arrived and included conventional banks, with the
appropriate firewalls in place, into the industry and allowed them to
offer Islamic financial products and services through its special
Islamic banking divisions (previously known as Skim Perbankan
Tanpa Faedah (SPTF) windows).
The third phase of development related to the second phases. As
these operations, achieved a critical mass, the option to transform
these operations into Islamic subsidiaries.
And the last phases of Malaysia Islamic banking system
development, as capacities were enhanced with the affluence and
growing importance of the current market, liberalisation allowed for
the international integration of our domestic Islamic banking
system.

On which I've shown little about the Malaysian Islamic banking system
development. if left to many more projects have been implemented to
ensure that the Islamic banking continue to be competitive with
conventional banks such as after the establishment of Bank Islam Malaysia
Berhad (BIMB) in 1983, Takaful Malaysia, Syarikat Takaful Malaysia was
incorporated on 29 November 1984. If you want considered for Islamic
finance in Malaysia has long existed before the establishment of Bank
Islam Malaysia Berhad, Tabung Haji itself which Perbadanan Wang
Simpanan Bakal-Bakal Haji was set up in November 1962, and began its
operation on 30 September 1963. The corporation to manage the savings
of Muslims, intending to perform the Hajj pilgrimage, was the result of a
working paper entitled "Rancangan Membaiki Ekonomi Bakal-Bakal Haji"
presented by Royal Professor Ungku Aziz in 1959 to improve the economy
of intending pilgrims.

3. Read The Following Table 1:

No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.

Year
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

Total
369,800
325,533
514,233
1,093,000
932,321
1,133,955
1,368,341
1,425,927
1,400,391
1,676,211
2,009,008
4,885,046
6,197,423
10,132,461
17,881,304
21,183,061
36,136,488
47,013,583
59,353,187
68,070,426
82,216,840
94,986,056
111,824,000

Based on your current knowledge, why there exists the obvious

performance for Islamic banking assets commencing in 1993-until now?
(Hint: please provide three (3) reasons, and explain each of them)
We can see the day where the development in the Islamic banking
industry today as the table above shows a very sharp increase in the
number in this Industry. This was due to three things that could be reason
why there exists the obvious performance for Islamic banking assets
commencing.
I.

Increase in the population of people in Malaysia

Increasing population in Malaysia is one reason to the increase in
performance for Islamic banking assets because of the increase in
Islamic banking services particularly Islamic banking products at

present. The population of Malaysia is currently at 27 million in

2011 and this number will increase from year to year. Thus, this
provides the best opportunities to banks, particularly in Islamic
banking operations to further their business and marketing
strategies to attract these people to use the Islamic banking
products. It can be concluded here that the increase in population is
a factor to increase the performance of Islamic banking.
II.

Support from the government in improving the Islamic banking

industry
Support from the government in the Islamic banking industry is also
one of the reasons which led to an increase in performance Islamic
banking assets. If seen what has been done by the government to
introduce the Skim Perbankan Tanpa Faedah (SPTF) to help the
improvement in this industry. But it is also the Malaysian
government gives strong support and opportunities that not a bit of
Islamic banking and financial institutions to thrive. For example, the
government did not impose any income tax on savings made in the
Lembaga Tabung Haji. Besides that the government also provides
tax relief (not subject to corporate tax) to the Lembaga Tabung Haji
for 30 years and Syarikat Takaful Malaysia for 15 years. This shows
that the government's encouragement and strong support to the
Islamic banking institutions to move ahead in tandem with
conventional banking.

III.

an increasing number of corporations

This is also reason which has been an increase in performance for
Islamic banking assets. If seen corporate customers comprising of
Malaysian companies listed on the first board and second board of
the Kuala Lumpur Stock Exchange (KLSE). A listed company is
comprised of small companies and large size with a minimum paidup capital has been placed by the KLSE. This company basically
requires large financial resources to manage their business
activities. Therefore, they will try to get the financial resources or
the use of banking products, whether from conventional banking as
well as of Islamic banking. From the perspective of an increasing
number of companies, we can see from year to year. Growth of
these companies is very encouraging indeed as we can see the
reasons for the increase in performance for Islamic banking assets.
So indirectly it can lead to increased demand for the use of banking
products more efficiently and effectively. it gives advantage to the
bank in managing the business strategies of a more comprehensive
and effective, especially in providing quality service and offering
quality products that are attractive to these companies.

4. Discuss the profit accumulation concept in Islam and its relationship to an

Islamic bank.
Allah says in Surah al-Maidah (17):
All that is in the heavens and the earth belongs to Allah. These people
should share their blessing by creating balance and harmony in society.
According that, we should known everything in this world is owned by
Allah s.w.t and we as a human as a trustee that given by Allah. By thats,
we need to thankful to Allah and need to use the property in the right way
means Islamic ways. Other than thats, we also need to know to distribute
favors to be granted to those in need and also no deny the blessing of God
grace. And addition, when we try to acquire wealth bestowed by the God,
we need to know the limits outlined in Islam such as abstaining from
usury, gambling, fraud not harmful to with others and also no damage
environment.
Profit accumulation not only focuses to the individual performance but also
includes the institution and also banks. In the bank perspective, each of
banks performs to their goal such as to gain a profit. However, for Islamic
banking institutions, profit accumulation is not a main objective but more
to the human welfare in objective to help customer. Islamic banking
operate their transaction without involve in riba, gambling and others as a
first objective to operate in the Islamic way. It means, Islamic banking gain
a profit in halaal only to describe Islamic banking follow the shariah
(Islamic law). According thats, we can see when Islamic banking product
such as mudharabah (profit lost sharing), musyarkah (joint venture),
leasing, ar- rahnu and other product produce appropriate with the Islamic
outline. This entire product adjusted, where the main objective is not only
to the profit but also to human welfare such as mudharabah instrument
where mo to the sharing either losses or gain the profit. Other that, also
not involve in interest rate (riba), gambling and also cheating.
Next stages in profit accumulation are paying the zakat. Zakat is one of
the important parts as a muslim person and also for the Islamic banking
institution. Zakat means, a certain amount of property that must be
removed from certain. Zakat is very important to cleanse the property that
is due there because each property that we have belongs to God. Islam
promote the concept mutual assistance where for the rich man must help
the poor man. Thats means, by paying the zakat, poor man can feel mo

comfortable life. In that, Islamic banking also in the same situation where
need to pay a zakat from the profit their gain. Thats also as way how to
cleansing their property or profit.
Under profit accumulation also, we need to know where not only paying
the zakat, but also need to involve in charity activities. With the profit we
have, we need to help the children orphaned, disabled person, and also for
each need help.

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