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Journal of Asia Pacific Studies ( 2010) Vol 1, No 2, 188-224
The Paradox Struggle Between the Islamic and
Conventional Banking Systems
Aishath Muneeza, International Islamic University Malaysia
Ismail Wisham, International Islamic University Malaysia
Rusni Hassan, International Islamic University Malaysia
Abstract: Malaysia is a multi religious and a multi ethnic society with a
plural legal structure. The banking system of country is essentially dual in
nature and hence, there are two different sets of legal framework working
simultaneously. Today, the Islamic Banking system which emerged in
1983 has levelled up to the conventional banking system which had rooted
itself in the society a long time ago. Whether we believe it or not there are
challenges and clashes at hand due to the existence of the dual system in
the society and they need to be addressed properly, so that the clashes
between these two types of banking system can be minimized. There are
several quarrels between conventional and Islamic Banking laws. Some of
these clashes are created due to the application of common law or
conventional law based legislation to resolve the problems in the Islamic
banking system. The impact of this is huge, primarily because, Islamic
economics has a different premise from conventional banking and
applying the same legal principles to resolve disputes for both markets
does not work. Unlike conventional banking’s capitalist conviction that
winner takes all, Islam argues for a fair distribution of profit and loss and
bans purely speculative activity.
Keywords: Islam, Malaysia, Banking, Capitalism, Religion
Introduction
The Islamic banking system in Malaysia traces its root of
inception to 1983 and over time, has emerged itself to be one
that, not only can keep the pace with its conventional
counterpart, but to one which can offer its fair share in
terms of competition. Systems which function on two
different paradoxical statements but operating in the same
pluralistic system are inevitably bound to open quarrels with
each other in terms of its basis, operation and mind-set.
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