E.

DISCUSS THE ISLAMIC BANKING BUSINESS/OPERATION IN LABUAN

IBFC

Labuan IBFC introduced in October 1990 to satisfy the supplement the activities of
the domestic financial market occurs in Kula Lumpur, in order the reinforce the roles of
financial services to the Gross National Product (GDP) of Malaysia as well as cultivate the
island economy and areas within its surrounding area.

Islamic banking in Labuan was not new thing as the sector undergoes continuous
improvement such as implementation of Labuan Islamic Financial Services and Securities
(Amendment) Regulation 2013 in 1st April 2013. The introduction of this law has given a
clear opportunity for new player in the sector to grasp the opportunity for them to present
the Syariah based banking to the public especially those international investor that are
investing in Labuan.

With the few numbers of Islamic banking providers including other conventional bank
that also provide the Islamic finance, this would give foreign investor multiple choice for
them to choose to invest their funds. The requirements that are need by a certain
companies that willing to open an Islamic banking/operation in Labuan IBFC are listed under
section 156 of the Labuan Financial Service and Securities Act 2010(Act 705). Under this
law, a new establishes Islamic based banking or operation does not compulsory to have a
separate licence and there is also no additional licence fee involved. A Labuan bank may
submit the application for approval with the following documents:

Certified true copy of board resolution pertaining to the proposed establishment of

an Islamic banking window.1

Business plan inclusive of three years' financial projections.

Information on its own internal Shariah Advisory Board (SAB)

1
Labuan Islamic Banking Window. (n.d.). Retrieved November 01, 2017, from
https://www.labuanibfc.com/areas-of-business/financial-services/banking/labuan-banking
 Other than fulfilling the requirement under the Act 705, few incentives also were
given to those new established financial institute that are being issued under the Malaysia
International Islamic Centres (MIFC). Those incentives are:

1. Exemption from maintaining physical presence in Labuan. The Islamic divisions of Labuan
banks may open operations offices anywhere in Malaysia, subject to consideration by
Labuan FSA.

2. No limitation on the staffing and number of operations offices to be opened outside Labuan.

3. The operations offices are to conduct Islamic financial business in non-Ringgit currencies
and deal mainly with non-residents as per Labuan legislation.

4. Dealings with residents in non-Ringgit transactions are allowed as permitted under the
current foreign exchange administration policies.

There are many benefits by operation the Islamic financial in Labuan IBFC, the
benefit accrue to everyone from the workers to the supplier and processors of raw material,
the manufacturers, distributors, vendors and on the investors and financiers. Islamic
financial in an attempt to compete with conventional banking must never be involved in
schemes to use money for gambling to make money. Islamic financial in Labuan IBFC have
exemption from maintained the physical presence in Labuan and the Labuan Islamic might
opened operation office anywhere among in Malaysia, it is subjected to consideration by
Labuan FSA. Then, the Islamic financial also have no limitation on how many number were
their staff and the operations offices to be opened outside the Labuan.

The operations office of the Islamic Financial was conducted Islamic financial
business in Dollar currencies and dealt mainly with non-local as per Labuan legislation.
Furthermore, they was dealing with local in non-Ringgit transaction are allowed as permitted
under the current foreign exchange administration policies. There has been increased
interest by the global community in Islamic finance given its close linkage to economic
activities and its key pillars of fairness, transparency, risk sharing, and prohibition of
excesses and speculation.

There are recommendation to improve the Islamic financial or operation in Labuan

IBFC is increase the diversity of players in the Islamic finance industry that served the best
interest of Labuan IBFC by facilitated greater cross-border financial business and raised the
demand of wider spectrum of investors and customer base. This recommendation included
issued new Islamic Financial licenses with specialized expert to support the growth
wholesale and investment that provided innovative Islamic financial service and expanded
the business scope in enhanced their role to offer financial solution

Second, recommendation to improve the Islamic financial or operation in Labuan IBFC is

supporting the growth of Islamic fund and wealth management industry that can offered
innovative financial solution to meet the more advanced investment demands of raise
affluent population particularly in Asia and The Middle East, thus positioning Malaysia as
regional and international centre for Islamic fun and wealth management. By supporting the
international Islamic fund management in Labuan IBFC not only help to attract a potential
investor but also the relocation of talent in the international fund management industry. By
providing a competitive environment with appropriate prudential safeguard for Islamic
banking players that ventured into the high value-added financial services:

Asset management and banking business

Global fund and administrator service
Global cash management business
Trust business

Support the establishment of relevant vehicles for asset and wealth management and
wealth management such as asset managers, trust companies, family offices and
foundations in Malaysia, including in the Labuan International Business and Financial Centre
(IBFC). Promote the larger integration of social responsible investment principles through
Islamic financial or operation.

Third, the recommendation to improve the Islamic financial and operation in Labuan
IFBC is enhance liquidity in Islamic markets to facilitate more effective and efficient in
mediation of Islamic financial flow by developed a comprehensive type of innovative Islamic
financial instrument that met the requirement for international liquidity risk management
and enhance the dynamic of the Islamic capital markets through the development of
innovative Shariah-compliant instrument. That included by developing the new products to
facilitate Islamic repo transactions and unlock captive instruments. By implementing a
various type of globally accepted Islamic hedge instruments to lessen the market risks and
cross borders exposures. Its also by supporting further the development of real estate
investment trusts and exchange traded funds for the Islamic capital market, as well as by
encouraging Malaysian issuers to offer foreign currency Islamic capital market investment
products.