A Reconsideration of Middle Eastern Islamic Bank Practices in Malaysia


  • Hideki Kitamura National University of Malaysia




Middle Eastern Islamic banks’ contributions to product development in Malaysia have been frequently highlighted; nonetheless, there has been a research gap on the adaptation of foreign Islamic banks to the Malaysian market. This study examines this aspect through a case study of the practices of Kuwait Finance House Malaysia Berhad (KFHMB) among these foreign banks. The results of this exploration highlight the impact of Malaysian business customs and culture on KFHMB’s banking product selection, especially on the retail banking side. The findings herein imply that regional differences in products between Malaysia and the Middle East derive from differences in market environments rather than from mere differences in Islamic jurisprudence, as previous studies claim. Ultimately, this study asserts the value of an ethnographic approach to studying Islamic banks’ adaptation to foreign markets, especially considering the KFHMB’s dilemma of facing religious ideals versus market realities.

Author Biography

Hideki Kitamura, National University of Malaysia

Hideki Kitamura is a postgraduate student at Institute of Ethnic Studies (KITA), The National University of Malaysia (UKM). The National University of Malaysia [Universiti Kebangsaan Malaysia], Institute of Ethnic Studies. Bangi, Selangor, 43600, Malaysia. Compliance with Ethical Standards: got the permission of disclosure of informants’ interview data. No financial support for this paper.


Abdul Ghani, B., and Hussain, S.A. 2007. Islamic Debt as the Global Propeller. In: Islamic Finance News Guide 2007, pp. 21-28. Kuala Lumpur: Redmoney.

Abdul Rahman, H., Alashwal, A.M., Ayub, M., and Abdullah, A.A. 2013. Abandoned Housing Projects in Malaysia: Pressing Issues during the Rehabilitation Process. International Journal of Architectural Research, 7 (1): 65-73.

Anonymous. 2010. KFH to focus on consumer banking. New Straits Times May 1, 2010.

Anonymous. 2018. KPKT finding solutions for abandoned housing projects. EdgeProp September 7, 2018. https://www.edgeprop.my/content/1421438/kpkt-finding-solutions-abandoned-housing-projects. Accessed October 6, 2018.

Asutay, M. 2012. Conceptualising and Locating the Social Failure of Islamic Finance: Aspirations of Islamic Moral Economy vs the Realities of Islamic Finance. Asian and African Area Studies, 11 (2): 93-113.

Balala, M.H. 2011. Islamic Finance and Law: Theory and Practice in a Globalized World. London: I.B.Tauris.

Bank Negara Malaysia. 2006. Annual Report 2005. Kuala Lumpur: Bank Negara Malaysia.

Bank Negara Malaysia. 2007. Bank Negara Malaysia Signs Commodity Murabahah Agreement with Saudi Hollandi Bank. Press Release, May 17, 2007. Reference No. 05/07/06. http://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=706&lang=en. Accessed June 9, 2018.

Bank Negara Malaysia. 2010. Shariah Resolutions in Islamic Finance: Second Edition. Kuala Lumpur: Bank Negara Malaysia.

Bank Negara Malaysia. 2012. Implementation of Shariah Advisory Council of Bank Negara Malaysia’s Resolution on Bai’ Inah. Circular, December 19, 2012. Reference No. BNM/RH/CIR 008-21. https://islamicbankers.files.wordpress.com/2013/12/20121219-implementation-of-shariah-advisory-council-of-bank-negara-malaysias-resolution-on-bai-inah.pdf. Accessed April 2, 2017.

Bouyamourn, A. 2016. UAE Cabinet approves Sharia Authority launch. The National May 8, 2016. https://www.thenational.ae/business/uae-cabinet-approves-sharia-authority-launch-1.202169. Accessed March 21, 2018.

Chong, B.S., and Liu, M.H. 2009. Islamic Banking: Interest-free or Interest-based? Pacific-Basin Finance Journal, 17: 125-144. https://doi.org/10.1016/j.pacfin.2007.12.003

Fligstein, N., and McAdam, D. 2012. A Theory of Fields. Oxford: Oxford University Press. https://doi.org/10.1093/acprof:oso/9780199859948.001.0001

Granovetter, M. 2017. Society and Economy: Framework and Principles. Cambridge, Massachusetts: The Belknap Press of Harvard University Press.

Haron, S., and Shanmugam, B. 1997. Islamic Banking System: Concepts and Applications. Petaling Jaya, Malaysia: Pelanduk Publications.

Hasan, Z. 2011. A Survey on Shari’ah Governance Practices in Malaysia, GCC Countries and the UK – Critical Appraisal. International Journal of Islamic and Middle Eastern Finance and Management, 4 (1): 30-51. https://doi.org/10.1108/17538391111122195

Islam, R., Abdul Ghani, A.B., Kusuma, B., and Teh Yew Hong, E. 2016. An Analysis of Factors that Affecting the Number of Car Sales in Malaysia. International Review of Management and Marketing, 6 (4): 872-882.

Ismon, N.Y. 2012. Legality of Tawarruq in Islamic Finance. Tazkia Islamic Finance and Business Review, 7 (1): 81-108.

Ismail, S., Azmi, F., and Thurasamy, R. 2014. Selection criteria for Islamic home financing in Malaysia. International Journal of Business and Society, 15 (1): 97-110.

Khan, M.M., and Bhatti, M.I. 2008. Islamic Banking and Finance: on its Way to Globalization. Managerial Finance, 34 (10): 708-725. https://doi.org/10.1108/03074350810891029

Kuwait Finance House. 1981. Annual Report: Kuwait Finance House K.S.C 1980. Kuwait: Kuwait Finance House.

Kuwait Finance House. 2010. Annual Report: Kuwait Finance House K.S.C. and Subsidiaries 2009. Kuwait: Kuwait Finance House.

Lai, J. 2015. Industrial Policy and Islamic Finance. New Political Economy, 20(2): 178-198. https://doi.org/10.1080/13563467.2014.914159

Laldin, M.A., Abdul Khir, M.F., and Parid, N.M. 2012. Fatwas in Islamic Banking: A Comparative Study between Malaysia and Gulf Cooperation Council (GCC) Countries. ISRA (International Shari’ah Research Academy for Islamic Finance) Research Paper, 31.

Leutert, H.G., and Südhoff, R. 1999. Technology Capacity Building in the Malaysian Automotive Industry. In: K.S. Jomo, F. Greg, and R. Rajah (eds.) Industrial Technology Development in Malaysia: Industry and firm studies, pp. 247-273. London: Routledge.

Mahayudin, I., Ali, N., and Abdul Rahman, R. 2014. Islamic Banking Operations: The Malaysian Experience. Selangor, Malaysia: UiTM Press.

Mahmud al-Awan, M.M. 2008. Differences in Shariah Interpretations: The Impact on Islamic Financial Industry. In: Islamic Banking and Finance Institute Malaysia (IBFIM) (ed.), Contemporary Issues in Islamic Finance: Deliberation at the International Shariah Scholars Dialogue 2006, pp.35-42. Kuala Lumpur: Bank Negara Malaysia.

Mansour, W., Jedidia, K.B., and Majdoub, J. 2015. How Ethical is Islamic Banking in the Light of the Objectives of Islamic Law?. Journal of Religious Ethics, 43 (1): 51-77. https://doi.org/10.1111/jore.12086

Maurer, B. 2006. Pious Property: Islamic Mortgages in the United States. New York: Russell Sage Foundation.

Meera, A.K.M., and Abdul Razak, D. 2005. Islamic Home Financing through Musharakah Mutanaqisah and Al-Bay’ Bithaman Ajil Contracts: A Comparative Analysis. Review of Islamic Economics, 9 (2): 5-30.

Meera, A.K.M., and Abdul Razak, D. 2009. Home Financing through the Musharakah Mutanaqisah Contracts: Some Practical Issues. Islamic Economics, 22 (1): 121-143. https://doi.org/10.4197/Islec.22-1.1

Mohd Subky, K.H., Liu, J.Y., Abdullah, M., Mokhtar, Z.F., and Faizrakhman, A. 2017. The Implication of Musharakah Mutanaqisah in Malaysian Islamic Banking Arena: A Perspective on Legal Documentation. International Journal of Management and Applied Research, 4 (1): 17-30. https://doi.org/10.18646/2056.41.17-003

Muhammad, A.H. 2008. Differences of Opinion and Fatwa in Shariah Rulings: The Impact on Islamic Financial Industry. In: Islamic Banking and Finance Institute Malaysia (IBFIM) (ed.), Contemporary Issues in Islamic Finance: Deliberation at the International Shariah Scholars Dialogue 2006, pp.43-74. Kuala Lumpur: Bank Negara Malaysia.

Nagaoka, S. 2007. Beyond the Theoretical Dichotomy in Islamic Finance: Analytical Reflections on Murabahah Contracts and Islamic Debt Securities. Kyoto Bulletin of Islamic Area Studies, 1 (2): 72-91.

Nagaoka, S. 2008. From Regional Diversity to Transregional Integration: A Study on Short-Term Liquidity Instruments (Inah and Tawarruq) in Islamic Finance [イーナとタワッルクからみた現代イスラーム金融のダイナミズム−地域的多元性から東西市場の融合へ]. Kyoto Bulletin of Islamic Area Studies, 2 (1): 163-182.

Pollard, J., and Samers, M. 2013. Governing Islamic Finance: Territory, Agency, and the Making of Cosmopolitan Financial Geographies. Annals of the Association of American Geographers, 103 (3): 710-726. https://doi.org/10.1080/00045608.2011.628256

Poon, J.P.H., Pollard, J., Chow, Y.W., and Ewers, M. 2017. The Rise of Kuala Lumpur as an Islamic Financial Frontier. Journal of Regional Studies, 51 (10): 1443-1453. https://doi.org/10.1080/00343404.2016.1214254

Poon, J.P.H., Pollard, J., and Chow, Y.W. 2018. Resetting Neoliberal Values: Lawmaking in Malaysia’s Islamic Finance. Annals of American Association of Geographers, 108 (5): 1442-1456. https://doi.org/10.1080/24694452.2018.1439723

Rosly, S.A. 2005. Critical Issues on Islamic Banking and Financial Markets: Islamic Economics, Banking and Finance, Investments, Takaful and Financial Planning. Indiana: AuthorHouse.

Rosly, S.A. 2017. Performance of Foreign Islamic Banks in Malaysia. In: M. Ariff (ed.) Islamic Finance in Malayisia: Growth and Development, pp. 115-149. Kuala Lumpur: Pearson Malaysia.

Rudnyckyj, D. 2017. Subjects of Debt: Financial Subjectification and Collaborative Risk in Malaysian Islamic Finance. American Anthropologist, 119 (2): 269-283. https://doi.org/10.1111/aman.12861

Shuib, M.S., Sulaiman, A.A., and Mohamad, M.T. 2011. Middle East Bank and their Challenge operation in Malaysia: A Case study on Kuwait Finance House Malaysia Berhad. African Journal of Business Management, 5 (11): 4000-4006.

Smith, K. 2004. The Kuwait Finance House and the Islamization of Public Life in Kuwait. In: C.M. Henry, and R. Wilson (eds.) The Politics of Islamic Finance, pp.168-190. Edinburgh: Edinburgh University Press. https://doi.org/10.3366/edinburgh/9780748618361.003.0008

Smolo, E., and Hassan, M.K. 2011. The potentials of musha ̄rakah mutana ̄qisah for Islamic housing finance. International Journal of Islamic and Middle Eastern Finance and Management, 4 (3): 237-258. https://doi.org/10.1108/17538391111166476

The Central Bank of Kuwait. 2005. The Legal Issues in the Islamic Financial Services Industry. Presented at the Legal Issues in the Islamic Financial Services Industry. http://www.cbk.gov.kw/en/assets/pdfs/speech-01-03-2005-10-3076-1.pdf. Accessed October 10, 2018.

The Central Bank of Kuwait. 2007. Development & Integration of Islamic Finance, keynote speech at the opening of the 1st Annual World Islamic Finance & Investment Conference (WIFI) in the State of Kuwait, March 4-5, 2007. http://www.cbk.gov.kw/en/statistics-and-publication/publications/published-speeches.jsp. Accessed June 12, 2018.

Warde, I. 2000. Islamic Finance in the Global Economy. Edinburgh: Edinburgh University Press. https://doi.org/10.3366/edinburgh/9780748612161.001.0001

Watson, J.L. (ed.) 2006[1997]. Golden Arches East: McDonald’s in East Asia. 2nd edition. Stanford, California: Stanford University Press.

Yousef, T.M. 2004. The Murabaha Syndrome in Islamic Finance: Laws, Institutions, and Politics. In: C.M. Henry, and R. Wilson (eds.) The Politics of Islamic Finance, pp.63-80. Edinburgh: Edinburgh University Press. https://doi.org/10.3366/edinburgh/9780748618361.003.0003

Zaher, T.S., and Hassan, M.K. 2001. A Comparative Literature Survey of Islamic Finance and Banking. Financial Markets, Institutions & Instruments, 10 (4): 155-199. https://doi.org/10.1111/1468-0416.00044