A COMPARISON BETWEEN MALAYSIA AND INDONESIA IN ISLAMIC BANKING INDUSTRY

Year 2017, Volume: 4 Issue: 3, 276 - 286, 30.09.2017

Atikullah Abdullah

https://doi.org/10.17261/Pressacademia.2017.705

Abstract

Purpose-  This paper aims to compare Malaysia and
Indonesia in terms of current circumstances in the Islamic banking industry.
This is very interesting because of several factors. Firstly these two
countries are neighbors. Secondly, both countries have expressed their
aspiration to be the center for the Islamic banking industry not only in the
region but also in the world. Thirdly, both countries have significant differences
in demographics and economic conditions. It is therefore very interesting to
see which country is in a better position than other in the Islamic banking
industry at present. This will help researchers to predict which country will
achieve the target first if it occurs. Methodology-
The comparison will focus on five selected items in Islamic banking
institutions ie legal framework, court jurisdiction, capital growth, products
offered and shariah governance. For legal frameworks, court jurisdiction and
shariah governance analysis will be made on the basis of provisions in
legislations and statutes in both countries. Comparison of the products offered
will be analyzed based on the list of products and the amount involved.
However, since profit sharing activities are regarded as a key feature of an
Islamic banking system as argued by many authoritative scholars in this area,
the involvement of Islamic banking institutions in profit sharing based
products in both countries will be the main focus in the analysis. Capital
growth is chosen because according to Sula
(2011) the development of a bank, should be seen from the market share because
the market share reflects the portion from the sale of industrial goods or
services carried out by an industry. Prior to that, Shaffer (1993) reported
that market share is important, because it reflects the performance associated
with bank's competitive position in the banking industry.  

Findings- The study
shows that although both countries are making good progress in the Islamic
banking industry, no country is far ahead of another. While Malaysia is ahead
of Indonesia in some items, Indonesia is ahead of Malaysia in some other items.

 Conclusion- This paper concludes that
both countries have advantages and disadvantages of others in the Islamic
banking industry. Hence both should overcome their weaknesses and continue to
build from their strengths to make their aspirations a hub in the Islamic banking
industry as a reality  

Keywords

Islamic banking, shariah compliance, Indonesia, Malaysia, banking industry

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