DEVELOPING MILESTONE IN ISLAMIC FINANCE FROM MALAYSIAN BUDGET PERSPECTIVES

The annual budget tabling at the Parliament House has been a much awaited event for Malaysians since the last few years. The recent tabling of Budget 2009 by the Malaysian Prime Minister is no exception. While fingers may be crossed at every budget pronouncements for possible Government incentives affecting individuals and business entities, for policy-making and industry observers, the budgets would provide them a good perspective of the Government direction in terms of the policies. The size of budget allocations accorded to each policy item would give an inkling for the Government’s measured commitments.

Based on this observation, it is worth noting that the Malaysian budgets especially from 1999 until the recent 2009’s showcased the Government’s perseverance to foster a conducive environment for seamless implementation of the Islamic financial services in Malaysia. Most importantly, the positioning of Malaysia as an international Islamic financial center was rather a strategic move initiated after deploying at the domestic front, strong and structured institutional framework and enhanced business competitiveness for Islamic financial institutions.

On a historical note, Malaysia’s first foray into the Islamic financial services industry had begun as early as in 1962, with the setting up of the Pilgrims Fund Board (Tabung Haji) in November the very same year. The Tabung Haji outfit which availed the Muslim community in Malaysia a savings fund for their pilgrimage in Mecca was a novelty which had earmarked the emerging force of the Islamic financial services industry in Malaysia. Having had the start up setting for Islamic financial services, it took the Malaysian Government only about 21 years later to embark fully into the Islamic financial services industry. There were no known reasons behind this apparent delay. Perhaps, the rising Islamic sentiments in Malaysia during the late 1970s had re-ignited the Government’s interest in Islamic finance and thus laid down the foundations for Islamic financial services in Malaysia in early 1980s.

Between 1983-1984, a set of substantial Islamic finance legislation in the form of the Islamic Banking Act, Government Funding Act and Takaful Act were promulgated in the Parliament. While the main legislation set the pivotal benchmark for the development of comprehensive and conducive Islamic finance framework in Malaysia, it is the Government’s continued commitment in steering the direction of Islamic finance in Malaysia and ensuring smooth implementation of the Islamic financial services industry that transforms it to what it is today. The Malaysian budgets from 1999 until 2009 mirrored this steadfast determination.

KHAIRUL IDZWAN IDRIS

Timbalan Pengerusi
Biro Ekonomi Dan Pembangunan Usahawan
Pergerakan Pemuda Umno Bahagian Setiawangsa
Wilayah Persekutuan