KUALA LUMPUR, May 25, 2015:
Islamic banks in Malaysian are now able to offer investment accounts for their depositors under the Islamic Financial Services Act (IFSA) 2013 – which allows greater flexibility for Islamic banks to structure products, including deposit and investment accounts.
Islamic banks will conduct a suitability assessment on a customer to determine whether investment account is suitable for them, said the Association of Islamic Banking Institutions Malaysia’s (AIBIM) in a statement today.
“If a customer is found eligible, the bank would then recommend appropriate products with the customer’s risk appetite.
“Proposed syariah contracts which will define the intermediary’s role and bases for attributing returns generated to the intermediary and customer would be set up.
“The returns are based on performance of underlying assets and maturity as well as withdrawal conditions agreed at inception between the bank and customer.”
Customers, who opt for investment accounts which allow them to invest in the Islamic banks’ portfolio of assets, could potentially enjoy higher returns than deposit accounts.
AIBIM president Datuk Mohd Redza Shah Abdul Wahid said: “IFSA aims to encourage banks to diversify their product offerings. Hence, the Act requires us to clearly differentiate between investment and deposit accounts.
“This allows the banks to customise their products according to the customers’ profile and risk appetite. Those who are prepared to take higher investment risk could potentially earn higher returns”.
Just like any investment, he noted that the principal amount for investment accounts is not guaranteed.
Since these accounts are not deemed as deposits under IFSA, the funds are not protected under the Perbadanan Insurans Deposit Malaysia (PIDM) scheme, he added.
“The Islamic banks will conduct customer suitability assessments to ensure that customers choose investment accounts that commensurate with their risk appetite, financial profile and capacity. This is in line with the customer protection pillars under IFSA.”
With this new product offering, he said existing Mudharabah account holders can opt for investment or deposit accounts.