Islamic Financial Services Act 2013: Analysis from Islamic Deposit Product Perspective

The Islamic Financial Services Act 2013 (IFSA) came into force on 30 June 2013 with the objective to pave way for the development of an end-to-end Shariah compliant regulatory framework for the conduct of Islamic financial operation in Malaysia. From Islamic deposit product perspective, one of the issues which have raised concern among the Islamic banks is regarding the reclassification and requirements in differentiating between Islamic deposit and investment account. In that regard, IFSA has introduced two major classifications of products for the acceptance of money from customers by the Islamic banks, namely Islamic deposits and investment accounts. This paper will discuss on this issue particularly the way forward by the industry in complying with the said requirement. In addition to that, this paper will also explain in brief the existing Islamic deposit product structure used by most of Islamic banking institutions in Malaysia and the impact of IFSA requirements on the current structure. This article is based on qualitative research approach which is purely based on primary data gathered through library research and interview. In summary, the reclassification requirement as espoused in IFSA 2013 is one of the ways to reflect and appreciate the spirit of Shariah contract. Although it would require additional works for Islamic banks, at least it is a first step in migrating and phasing out from conventional banking environment. As this initiative is still in the pipeline and has long way to go, it seems that Ijtihad is an integral part of developing new products.