Development of Islamic Deposit Product Post-Islamic Financial Services Act 2013: A Retrospective Analysis

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. A key concern among Islamic banks is regarding the reclassification and requirements in differentiating between Islamic deposit and investment account. 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 retrospectively analyses the development of Islamic deposit products following the enforcement of the IFSA. This paper explores the industry's response to these requirements and outlines the prevailing structures of Islamic deposit products used by Malaysian Islamic banks. It also assesses the impact of IFSA regulations on these structures. This study is based on qualitative research approach which is purely based on primary data gathered through library research and interview. The paper highlights that, while the reclassification requirement under IFSA 2013 necessitates additional efforts from Islamic banks, it aligns Islamic banking more closely with the objective of underlying Shariah contract (maqasid al-aqd). This initiative, though still in its early stages, represents a departure from conventional banking practices and emphasizes the significance of ijtihad in the development of novel financial products.