The Role of Islamic Financial Institutions in the Socio-economic Development in Malaysia

Muhammad Anwar


It is a truism to say that the financial sector plays a
critical role in the socio-economic development of any country.
Financial institutions provide for effective mobilisation and allocation
of savings and this contributes effectively towards socio-economic
development. Malaysia, which is, as of now, perhaps the fastest growing
country in the third world, is characterised by a well-developed
fmancial system. What, however, is unique about Malaysia is that, as in
some other Muslim countries, conventional and Islamic fmancial
institutions exist side by side, interacting with one another. The
development of Islamic fmancial institutions in Malaysia has the
potential to play a leading role in serving the Muslim Ummah and
contribute towards socio-economic development of the country in
conformity with Islamic se~ibilities. Yet their market share is rather
insignificant in comparison with the conventional fmancial institutions.
As elsewhere, financial institutions in Malaysia provide four distinct
types of intermediation in the process of exchanging funds and fmancial
instruments among the surplus units and the deficit units - viz.,
denomination intermediation, maturity intermediation, risk
diversification intermediation, and liquidity intermediation.

Full Text:




  • There are currently no refbacks.