Banking (Islamic Banking)

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Islamic Banking activities undertaken by Bank Islam Malaysia Berhad (BIMB) and 52 other financial institutions (25 commercial banks, 22 finance companies and 5 merchant banks) under the interest-free banking scheme (IBS) have been similarly affected by the deflationary impact of the crisis besetting the region since the middle of last year. The total assets of the Islamic banking system (IBS and BIMB) declined by 24.3% during the first seven months of 1998 to RM13, 542 million at end July 1998 (July 1997: RM12, 983 million). Total deposits mobilised by the Islamic banking system increased by 2.8% to RM10, 172 million at end-July 1998 as compared with RM9, 895 million as at end of 1997, while total financing registered a decline of 0.8% toRM10, 660 million. The bulk of additional deposits was mobilised through a newly introduced product, the Negotiable Islamic Debt Certificate (NIDC) which mobilised RM 703 million, general investment as well as specific investment deposits which totaled RM3, 574 million and RM1, 588 million respectively. NIDC was made available by BIMB to all customers since March 1998. Savings deposits during the first seven months of 1998, however, declined by 2.2% and 23.9% respectively, reflecting the impact of the decline in per capita income and reduced economic activities.

In terms of sectoral breakdown, a major portion of the financing was channeled to the housing sector (29% or RM3, 094 million of total), while 17.2% was extended to the other construction and real estate sector (RM1, 835 million). Financing extended to the manufacturing sector accounted for RM1, 092 million or 10.2% of total financing provided by the Islamic banking system.

In the Islamic Interbank Money Market, the value of transactions recorded during the first seven months of 1998 was RM68, 745 million. This was 24.7% when compared to RM97, 333 million transacted during the corresponding period of 1997. In the case of Islamic Bas, the first seven months of 1998 was RM1, 339 million while the value of Green Bas was RM7, 747 million.