Malaysia Toward an Islamic State
ISLAMIC BANKING IN MALAYSIA
A significant development in the Muslim World in the seventies and eighties was the pan-Islamic movement. This movement aimed to revive the glory of Islam and began todemand the application of Shariah in all aspects of life. The effort to establish in IslamicBanking is one manifestation of this movement. The Muslim countries began torediscover Islam and wanted to mould their economic and financial activities inaccordance with Islamic values.
The seventies and eighties of the present century has witnessed the emergence of anumber of Islamic banks and financial institutions whose modes of operation aredistinct from those of conventional banks. The establishment of these institutions is oneof the several manifestations of the 'back to religion' movement which is fast gainingstrength in present day muslim societies (quoted in Abulhasan et al. 1991: 155)
The Muslim world has been over-burdened for too long by western modes of socialand economic thought. A large portion of the Muslim worldhad been subjugatedculturally, economically and politically by the colonial powers. Even though they haveachieved independence from their colonial masters, the colonial principles are still deeprooted in the social, economic, political and cultural life of Muslim communities. Thus,the emergence and expansion of an Islamic banking system is the starting point of a new path breaking change in the Muslim world. It is a process of liberating the Muslims fromthe yoke of domination by western thought, values and institutions and remodeling theirsocial and economic life in accordance with shariah.
The issue of Riba has long been a problem for Muslims. Even what constitutedRiba itself has been a subject under serious discussion. The existence of Riba has been