BWSB 5053 CONTEMPORARY ISLAMIC BANKING

INDIVIDUAL ASSIGNMENT:

ARTICLE REVIEW

SUBMITTED TO:

DR NURUL HUDA BINTI ABDUL MAJID

PREPARED BY:

MUHAMMAD HIDAYAT ‘IZZUDDIN BIN JAMIL (830204)

ARTICLE REVIEW
Islamic banking has shown a great credibility in handling finance matter globally. It has
been said that the gross profit for Islamic banking globally has achieved 1.7 trillion dollar. In
other matter, we could see that only 69 countries globally has implemented the Islamic banking
in their financial sector. This could see that only a small of percentage for countries that only
use Islamic banking in their daily life and mostly it was in the majority Muslims country. In
this study, the researcher has made a research base on the non-muslims country which
Monzambique where most resident in the country is a Christian and Islam religion stayed at
number two as a minority religion in the country.

Base on the research, we could said that people nowadays tend to find something that
they need when they aware of the product existence. As we can see, knowledge and awareness
is two different thing. Knowledge is when people learn about a certain product and does not
know when they will need its benefit. For awareness, it is when people learn and have
knowledge about it and the implement it in their live according to the situation that they must
face. As a result, the awareness of people in Monzambique about the Islamic banking is low
according to research and it is also has been said that Muslims people in Monzambique have a
knowledge about Islamic banking but does not aware that it is very important in their daily life.

It has been said that Islamic banking is one of the financial system among all. This is
because Islamic banking is one of the system that must follow the guide of shariah and another
one is that they could overcome the financial crisis problem during 2007 until 2009. Due to
that, Islamic banking has been declared as one of the stable system in the world. As of that, we
could see that nowadays people which is also non-muslims already use to the Islamic banking
system due to the capability of them to show to the world that they also could become one of
the financial system that they could use nowadays.

In the study also has been said that although Islamic banking looks the same as the
conventional system of finance, it has been said that Islamic banking is differ in the term of
interest where it is haram in Islam. They also need to avoid any certainty which is called as
gharar and maysir which is known as gambling. This is what make Islamic banking is different
from conventional system of finance where Islamic banking must follow the rules that have
been written in al-quran and shariah.

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 It has been said that in South Africa, there is 96.6 percent of Muslims people know
about the product that Islamic banking offer such as ijarah, murabahah, mudharabah and
musharakah. Based on the percentage, is also can be said that there is a willingness for muslims
people to implemented the Islamic banking product but it also must depend on the government
itself whether to make it become real or not. This is because in Monzambique the majority of
people is a Christian belief, so, it is hard for government to implement the Islamic banking
product in the market due to the lack of knowledge problem among the majority people.

In Monzambique, the financial system that have been offer to people is five which is
credit institution, financial societies, insurers, social security institutions and management of
entities fund and lastly is capital market institution. Although there is quiet many of financial
system that have been offered but none of this institution has offered any Islamic product in
their system although Monzambique is one of the members under the OIC.

Based on the research also has been said that there are three banks which act as a big
bank in Mozambique which is Millennium Bank, Banco Commercial De Investimentos and
South Africa’s Standard Bank. All of the bank mention is the commercial bank and 85 percent
of total banking asset are concentrated on all these banks. These banks also represent 35 percent
of banking system in the national territories. In addition, all of these bank is placed in the capital
city of Mozambique which is in Maputo. It has been said that the population of Maputo is only
4 percent among Mozambique but they also have a high percentage of people with bank
account which is 43 percent. This is suitable based on the reputation as capital city where every
institution including financial system also has been centralized in the capital city.

As stated before, there is no Islamic banking product in Mozambique but Mozambique

government has considered to establish the necessary framework for the Islamic financial in
the country. Although most of regulation is opposite to the Shariah law, the Mozambique
government could establish the rule where there zero interest of deposit, new leasing operations
and venture capital.

The author of the research also said that the term of loan should be change to another
word which is financing where this word is suitable to the product of the Islamic Finance like
murabahah, musharakah and mudharabah. He also said that term of interest rate also should be
change due to the forbidden of sharia in using interest in financing product. The term should
change to the profit rate which could be as fee for the services that have been given by officer
of the bank.

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 Based on the methodology that have been used by the researcher which is by using the
random sampling of the customer from the Mozambique Bank, they have obtained a result
which is considerably poor knowledge of Islamic banking product from the customer of
Mozambique Bank.

Firstly is about the culture of Islamic Banking, there is 72.2 percent of customer does
not aware of the existence of the Islamic banking product in the market while there is another
27.8 percent of customer was aware about the Islamic banking in the market. Most of the
customer that aware about the Islamic Banking is coming from the Muslims people. Then, from
the customer who aware about the Islamic Banking, there is majority of 67 percent does not
know the difference between conventional banking and Islamic banking. This shows that
people does have the knowledge about the Islamic banking but cannot imagine how Islamic
Banking and conventional system due to this two system is considerably same which is coming
from the bank. In addition, there is 57 percent of customer is willing to adopt the Islamic
Banking if it has been implemented in the country. We can see that there is a chance of the
Islamic Banking could be popular among customer and mostly from the Muslims people if they
know how this system work.

Secondly is about the terminologies of the Islamic banking, the result shows that 96.3
percent which is the majority from the respondent does not know about term Riba. It also has
been said that although some are Muslims, they does now know about the term of Riba but
they do realise about the term of interest free which is based on Shariah and the respondent that
know about the term is only 4 people and 3 of them is Muslims. This has been showed that, the
Muslims people of Mozambique does not have any exposure about the Islamic teaching in term
of financial aid which is based on Shariah. Next is about the specific terms of Islamic Banking
which as expected, there is majority of 90 percent people does not know about the terms and
only 10 respondent of Muslims that only know about the term like musharakah, mudharabah,
and ijarah. Surprisingly, for ijarah term, there is equal percentage between non-Muslims and
Muslims that know about this term. This is a chance for the Mozambique government to spread
more about the awareness of leasing contract of the Shariah principle because it shows that
people considerably very interested in the taking of the leasing based on the Shariah principle.
This because maybe there is no interest fee that will be taken if they want to ask for financing
for any product they want which is like house and vehicle.

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 Lastly is about the communication channel of the Islamic Banking, it has been showed
that based on the research, the most platform that has been used by both Muslims and Non-
Muslims people is from the internet, television and radio. All of this platform is used by them
that is aware about the Islamic Banking. It also has been said by the author that internet is not
the best platform for the innovation of the Islamic Banking product but internet platform is
good to use to influence for the implemented of the Islamic Banking Product in the country.
As a result, Mozambique government or Bank of Mozambique should come out with one of
the alternative to spread wide about the system of Islamic finance work to the people. They
could use the television, radio or newspaper to make people learn about this system. By using
this, it also not only will reach to urban people but the 60 percent of people that coming from
the Mozambique rural area also can learn about it because not everyone could afford to use
internet in their daily mostly people that coming from poor background.

In conclusion, this article shows that the awareness of Mozambique people towards
Islamic Banking is low due to first is coming from the law of the country itself because they
only implement only one banking system which is conventional system. Secondly is because
majority of the people in the country is Christian belief, so it is hard to attract people to use the
Islamic Banking product because they have lack of knowledge towards the terms that is being
used in the shariah. Lastly is because there is lack of knowledge from both religions whether
is Muslims or Non-Muslims. This will make the work to implement the Islamic Banking is
hard because they need to learn more how to does the Islamic Banking system could be
different from the conventional system although it is coming from the same bank if
Mozambique government want to implement the dual window bank where there is
conventional finance system and Islamic finance system.