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Saturday, 15 September 2007

CIMB Islamic targets RM1b deposits for Advance Profit

KUALA LUMPUR: CIMB Group via CIMB Islamic Bank Bhd, targets RM1 billion in deposits from its Islamic fixed deposit – Advance Profit – programme over the next five months. The bank said on Sept 14 that it was the first Islamic financial institution in the country to offer an Islamic fixed deposit that allowed depositors to collect cash instantly upon opening an account. CIMB head for retail banking Peter England said he was confident the product would “attract over RM1 billion over that period of time (five months),” and would contribute about 5% to CIMB Islamic’s retail deposit. He was speaking to reporters at the launch of the product. Also present was CIMB Islamic chief executive officer Badlisyah Abdul Ghani. Advance Profit allows customers to place a minimum deposit of RM10,000 for three months and they can immediately collect 3.35% of their invested amount upon deposit. The rate is available for a limited period. It can be used as security against another loan. Badlisyah said that depositors could choose to collect in the form of cash, banker’s cheque, demand draft or transfer it to other CIMB bank or CIMB Islamic savings or current accounts.
Depositors can withdraw their principal when the three months expires, or renew their deposit upon maturity by crediting the principle amount back to Advance Profit. However, England said: “If you withdraw the principal before maturity, you get your money back with the taken profit deducted.” The current limit was three month as it “allows us to provide a significantly higher profit rate”, he said. CIMB Islamic would look into a minimum of one month and a maximum of five years but this would hinge on sufficient volume. Advance Profit is a Shariah-compliant account also known as Fixed Return Investment Account-i (FRIA-i) based on the Tawarruq concept in relation to Commodity Murubahah, which requires the customer to appoint the bank as an agent to purchase a commodity on a cash basis. The bank would buy back the commodities from the depositor on a deferred sale at a cost plus profit margin and sell the commodities back to the market. CIMB would invest in crude palm oil (CPO) and metal-based contracts but the type of commodities was not set. England said the Islamic banking system had about RM25 billion to RM26 billion in deposits, which was less that 20% of total retail deposits of RM290 billion. “There is a huge opportunity for Islamic banks to take a much greater share of the total deposits in the system,” he added. “Our market share in terms of retail for Islamic is less than 2%, our conventional business in deposits is about 9%.” Badlisyah said that there would be at least another two products by the end of the year including one on “Islamic micro-financing.” - (DE, 15 Sep 07)
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