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is charged with using its Islamic expertise to consult the BNM on financial issues , ultimately ensuring compatibility with ������� ( Bank Negara Malaysia , 2012 ).
Although Malaysia is an Islamic country , it has a mixed population consisting of Muslim Malays and other indigenous people ( Bumiputera ) at 60.5 %, Chinese at 22.8 %, Indian at 6.8 %, and others ( including internationals ) at 9.8 % ( Department of Statistics Malaysia , 2012 ). In reflecting this cultural diversity , Venardos ( 2006 ) believes the Malaysian government has had to balance its policy between the demands of the majority and of not alienating its Chinese population who are considered as the “ catalysts ” for industrialization ( p . 144 ). From an economic perspective therefore , societal inclusion is beneficial to Malaysia ’ s growth and although there are tensions surrounding the implementation of Malay dominated policies , its financial stability suggests a degree of healthy interaction . For example , GDP growth rates ( at constant 2000 prices ) have shown −1.4 % in 2009 , 7.2 % in 2010 , and 4.2 % in 2011 ( Department of Statistics Malaysia , 2012 ), while poverty has been reduced from 49.3 % in 1970 to 3.8 % in 2009 ( Economic Planning Unit Malaysia , 2010 ).
In supporting this growth , the Malaysian Islamic banking sector has proved innovative in its design of products although also known for stretching the limits of Islamic reasoning . ����������������������������� ��������� 7 methods are commonly used for credit issuing whilst ��������� is common for depositing where it exists as a “ variable rate liabilities ” ( VRL ) meaning that the bank controls payouts to the depositor ( Rosly , 2005 ). Since the onset of Islamic financing in Malaysia however , the most popular form to emerge has been ����������������� ( BBA ) ( Ahmad , 2006 ) 8 or in simple terms “ deferred sale ” products ( a form of debt financing — non PLS — used predominately for property and other consumer items ). For Radiah Abdul Kader and Yap Kok Leong ( 2009 ), BBA ’ s success will be increasingly challenged by the competitive nature of the parallel banking system as the appeal of its fixed rate lessens when compared to fluctuating interest charges . To maintain the strength of the Islamic sector , experts such as Kader and Leong ( 2009 ) and Rosly ( 1999 ) have called for a greater diversity in products that focus on leasing ventures and more flexible rates . This continued shift to conventional methods is an ongoing occurrence and highlights the need of Islamic banks in Malaysia to maintain competitiveness within the parallel financial system .
Flexibility and adaption is therefore evident within the Malaysian Islamic banking system regarding institutional survival , but at the same time there is a clear tension with its commitment to Islamic societal development . The Asian Development Bank ’ s Gini coefficient statistics rate Malaysia as one of the most unequal countries in East Asia with the sixth highest income disparity in the Asia-Pacific region ( Karim , 2010 ). The government has tried to address these issues by encouraging voluntary ����� payments , which are then dispersed through regional ����� commissions to those most in need . Karim ( 2010 ) however is notably critical of the official zakat redistribution process and its influence upon the growing emergence of “ loan sharks ” or “ pawn brokers ” ( p . 114 ). For him ����� payments , which occur on a yearly basis , only serve to cover some of the debt accrued over the same period and merely attend to immediate consumption needs of the poor . Nevertheless , recognizing this market “ new poor ” banks have begun to offer a legitimate form of Islamic “ pawn broking ” or �������� , that offer “ safe keeping ” charges instead of interest ( Karim , 2010 , pp . 114- 115 ).
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