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Friday, 1 August 2008

Islamic banking fast catching on in Thailand

Source ::: The Peninsula / By Abdul Basit

Bangkok • Islamic banking is fast catching on in Thailand, which has a sizeable Muslim population in the south of the country.

The Islamic Bank of Thailand (IBT) was established under a special act by the country’s parliament in 2002, under the supervision of the Ministry of Finance. The objective was to provide Islamic banking services to all customers, irrespective of their religion.

The idea of setting up an Islamic bank first germinated in 1994 with the formation of a so-called ‘Growth Triangle’ encompassing Thailand, Malaysia and Indonesia. With this scheme, Thailand took on the responsibility of developing its southernmost border provinces. The designated areas selected had Muslim majorities and it was felt there was a need to cater to them so an Islamic bank should be set up.

To develop Islamic banking, commercial banks were also brought on board and asked to provide Islamic products alongside their conventional services. The Bangkok Metropolitan Bank in 1997 started offering Islamic financial services but ran into financial difficulties and refunded customer deposits.

An Islamic banking law was drafted in 2002 allowing for the IBT to be set up in 2003 starting with a head office and a branch. This was followed by further branches, making for a total of nine.

In 2005, an agreement was reached to transfer Shariah-compliant funding from the Krung Thai Bank to IBT, which added another 18 branches to the network. IBT now offers deposit and credit facilities and services like Mudaraba and Wadia which are trust deposits with funds available from ATMs, deposit books and cheques.

According to IBT: “Islamic banking has created great interest among Thai Muslims, especially in southern Thailand and is not limited to those of Muslim faith. The bank has therefore developed a variety of non-interest-bearing financial instruments to meet customer needs fully-compliant with Islamic faith and social justice.”

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