Financial System and Islamic Banking in Malaysia Quiz

An Overview of the Financial System and Islamic Banking in Malaysia

• The financial system in Malaysia comprises banking institutions, non-bank financial institutions, and financial markets.
• The banking system includes Bank Negara Malaysia (the Central Bank), commercial banks, finance companies, merchant banks, Islamic banks, and others.
• The non-bank financial institutions include provident/pension funds, insurance companies (Takaful), development finance institutions, and others.
• The financial markets include money market, foreign exchange market, capital market, equity market, bond market, public and private debt securities, derivative market, commodity futures, KLSE futures, KLIBOR futures, and offshore market.
• Bank Negara Malaysia's main objectives are to issue currency, act as a banker and financial adviser to the government, promote monetary stability and a sound financial structure, promote the reliable, efficient, and smooth operation of national payment and settlement systems, and influence the credit situation to the advantage of Malaysia.
• There are currently 26 commercial banks and 16 licensed Islamic banks in Malaysia.
• The legal basis for the establishment of Islamic banks was the Islamic Financial Services Act 2013 (IFSA).
• Merchant banks specialize in syndication, corporate finance, management advisory services, arranging for the issue and listing of shares, as well as investment portfolio management.
• Discount houses specialize in short-term money market operations and mobilize deposits from financial institutions and corporations.
• The investment bank's scope of activities includes taking deposits and granting financing, fund management and unit trust businesses, underwriting new debt and equity securities, and helping corporations, governments, and other groups plan and manage financial aspects of large projects.
• Representative offices of foreign banks are merely liaison offices and do not offer banking products directly to the Malaysian market.
• Development Financial Institutions (DFIs) provide specialized financial products and services to suit the specific needs of targeted strategic sectors such as agriculture, infrastructure development, and international trade. The main DFIs in Malaysia are Agro Banks Bhd, Bank Pembangunan Malaysia Bhd, EXIM Bank Bhd, SME Bank Bhd, BSN Malaysia Bhd, Bank Rakyat Malaysia Bhd, GCC, Tabung Haji, and Malaysian Industrial Development Finance (MIDF).