The Changes of Product Structure in Islamic Banking: Case Study of Malaysia

The establishment of Islamic banking is very important in the Islamic world in general and
Malaysia in particular. The emergence of Islamic banking is capable of preventing things that are
prohibited by Islam such as Riba, (interest), maize (gambling) and gharar (uncertainty) practiced by any
conventional bank. Instead, Islamic banks can generate Shariah-compliant activities, encourage the
sharing of lost profits, and most importantly seek justice.

The purpose of this study is to different Islamic banking principles between Malaysia and GCC
Countries . What is GCC ? GCC is a Gulf Countries Council. Among the countries involved are Bahrain,
Saudi Arabia, Kuwait, Qatar, Oman, and the United Arab Emirate. There are several studies that have
been reviewed by Mohd Bakir (2008) J Sudin Haron (1999) and Saiful Azhar (2005) in discussing the
principles applied by Islamic banking in Malaysia and GCC countries. From these studies, the number of
Islamic banking principles used in GCC countries is less than that of their counterparts. Another
interesting finding is the rejection of two popular principles by Malaysian Islamic banking i.e bay al-innah
and bay al-dayn by GCC countries. Some GCC members apply the principles of tawarruq in their Islamic
banking operations.

Bay al-inah and bay al-dayn have long been debated among scholars from the Middle East and
Local. Only the Mazhab Syafiee accept bay al-inah and bay al-dayn in carrying out Islamic financial
transactions. Other mazhab reject the use of both principles in Islamic finance, restrict the rules and
place them as ordinary people who are permitted by usuliyyin to practice whatever sect they like.
 While GCC scholars have the opportunity to practice fiqh comparative teaching methods to
identify legal principles or Shariah principles that are valid for Islamic finance regardless of their scholar.
But in this case, Malaysia Islamic banks are more progressive to conventional bankers and more efficient
but yet too liberal to GCC scholars

However, the differences in the principles used by both GCC countries and Malaysia have
weakened some of the ways of promoting Islamic products and services in Malaysia to be accepted
globally. To conclude, among other things that need to be done is to align the differences between
scholars and to create new innovative products with equity financing to meet current demand.and
provide some solution of suggestions on how Malaysian Islamic products and services are globally
acceptable.