During the 5 years rule of Abdullah Badawi as Prime Minister of Malaysia, the Islamic banking concept has made significant inroads in Malaysia. Banks with non-Muslim names have adopted the Islamic banking system, which in a sense, has even become their primary banking concern. How will this system survive after Abdullah Badawi steps down as Prime Minister?

The Abdullah Badawi reign was dominated by three major aspects of economic development. While it shun away from massive, mega construction projects, it decided to build a three pronged development facade which was later modified to adjust to the urgencies of the economy. Focusing on Halal hub, Islamic Capital Market and Education, the first few years of the Badawi regime saw a rapid rise of Islamic banks in the country.
The extent of this rise is now to be seen vividly with Hong Leong, Alliance Bank and the Public Bank altogether turning into 'Islamic Banks'. Did these banks really had to compete to the extent of transforming themselves into 'Islamic Banks' or would a simple counter for Islamic banking - like the one that exist Hong Kong & Shanghai Bank or the City Bank and also the Standard Chartered Bank would have suffice to show their embrace of the Islamic banking concept?
Nevertheless, with the Islamic banking concept gripping all the local banks to the point of turning them into full fledged 'Islamic' banks, Abdullah Badawi achieved with one stone what others would have dreamt of.
Nonetheless, it is interesting to see now how these banks will maintain the 'Islamic' tag since the Public Bank, not a Malay-Muslim or foreign Muslim owned bank, is now officially known as the Public Islamic Bank. The Hong Leong too is now the Hong Leong Islamic bank and this is true to other local banks that are competing for the 'Islamic' tag. They offer the same basic 'Islamic' banking services that allows them to prosper even more by saving on 'interests' which is not disbursed to those who opens accounts - current or savings - that does not pay interests. It tend to enrich the banks which in return offers a minimal 'profit' or 'gift' to the depositors.
Now let us be direct. The non-Muslim banks are still more attractive to the businemen who do not bother about the 'Islamic' tag and who want to have their interest rates to be more alluring in order to make the extra bucks on their savings. When it comes to Fixed Deposits, it appears that the non-Muslim owned 'Islamic Banks' are the ones that performs better due to the more attractive interest rate plans they offer on FD's. Since FD's come with interest, it also attract the cunning businessmen and businesswomen who would not want to store their money in banks that does not bother to pay sound interest rates!
Hence, it is apparent that if the future regime of Malaysia does not put pressure of any sorts by imposing Bank Negara rules and regulations to convert all the accounts into 'Islamic' ones, the future of Islamic Banking could be in jeopardy in Malaysia.
Nevertheless that does not mean we will see a destruction of the system, au contraire, we can see a retraction of the system with non-Muslim owned banks turning back to the conventional system to attract more customers with the 'interest' paid.
This also does not mean Bank Muamalat, Bank Islam and the foreign Arab and Muslim owned banks in Malaysia will not continue to offer 'Islamic Banking' as the prime option.

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