An Insight into Investment and Deposit Products Offered by Islamic Banks in Malaysia

Abstract

The aim of this paper is to understand the practical application of investment and deposit products in comparison with the guidelines offered by the Islamic Financial Services Act (IFSA). Here, the products’ features and benefits of the banks’ deposit and investment products are highlighted. A performance analysis of both products is conducted among different banks in Malaysia, and their results are used to draw conclusions on the effects of IFSA on banks. The data was based on two banks in Malaysia: one was a fully-fledged Islamic bank, and the other was a subsidiary bank offering Islamic banking products. The information was obtained from the banks’ websites, annual reports, and Bank Negara Malaysia’s (BNM) website. The findings of the research are that the two banks analyzed all conform to the guidelines issued by IFSA. The volumes of investment products have significantly decreased after the introduction of IFSA compared to the volumes of deposit products. Bank Islam and CIMB Islamic both provide items that are suitable for use with an IFSA. Customers have a thorough understanding of the benefits of various types of deposits and investments.

Full text

AL HIKMAH RESEARCH
& PUBLICATION CENTRE
Al-Hikmah International Journal for
Islamic Studies & Human Sciences
Vol. 6, No. 1, February 2023
E-ISSN: 2637-0581
An Insight into Investment and Deposit Products Offered by
Islamic Banks in Malaysia
Zaki Ahmad
School of Economics, Finance and Banking, Universiti Utara Malaysia
94zakiahmad@gmail.com
Md Mahfujur Rahman
Islamic Business School, Universiti Utara Malaysia
dr_mahfuj@yahoo.co.uk
Issa Khan
Department of Shari’ah and Management,
Academy of Islamic Studies, University of Malaya
issa@um.edu.my
Abstract
The aim of this paper is to understand the practical applica-
tion of investment and deposit products in comparison with
the guidelines offered by the Islamic Financial Services Act
(IFSA). Here, the products’ features and benefits of the banks’
deposit and investment products are highlighted. A perfor-
mance analysis of both products is conducted among differ-
ent banks in Malaysia, and their results are used to draw con-
clusions on the effects of IFSA on banks. The data was based
on two banks in Malaysia: one was a fully-fledged Islamic
bank, and the other was a subsidiary bank offering Islamic
banking products. The information was obtained from the
banks’ websites, annual reports, and Bank Negara Malaysia’s
(BNM) website. The findings of the research are that the two
banks analyzed all conform to the guidelines issued by IFSA.
The volumes of investment products have significantly de-
creased after the introduction of IFSA compared to the vol-
umes of deposit products. Bank Islam and CIMB Islamic both
provide items that are suitable for use with an IFSA. Custom-
ers have a thorough understanding of the benefits of various
types of deposits and investments.
Keywords: Islamic Financial Services Act, Investments, De-
posits, products
Article Progress
Received: 18 December 2022
Revised: 01 February 2023
Accepted: 13 February 2023
*Corresponding Author:
Md Mahfujur Rahman
Islamic Business School,
Universiti Utara Malaysia
dr_mahfuj@yahoo.co.uk
mahfuj@uum.edu.my

2Khan Rahman, IssaZaki Ahmad, Md Mahfujur
Introduction: Banks are financial institutions which play a
major role in the economy. They are intermediaries between the de-
positors and the investors. Malaysia is one of the leading countries in
terms of Islamic banking and capital market. Malaysia has come a long
way since the first Islamic bank was established in the country in
1983. According to (BNM), there are 16 Islamic banks, the banks serve
as custodians of all Islamic deposit and all the deposits are for safe
custody only (Islamic Banking Act 1983, 1983). Existing and future Is-
lamic financial institutions in Malaysia hold great potential for devel-
oping and expanding the country's Islamic financial sector (Khan et
al., 2021).
Before IFSA, there was not any specific, end to end Shariah in-
clusive framework and act. Potential growths in Islamic financial ser-
vices and products have compelled Central Bank of Malaysia (BNM) to
come up with new regulatory framework. So BNM has come up with
IFSA which has replaced the Islamic Banking Act (IBA)1983, Takaful
Act 1984, Payment System Act 2003 and Exchange Control Act 1953
(Bank Islam Malaysia Berhad, 2014). Emergence of IFSA has provided
greater clarity and boosted the consumer confidence in the use of Is-
lamic financial services and products. Classification and impairment
of loans or financing is governed by the Central Bank of Malaysia (Nor
et al., 2019).
Under the repealed IBA (1983), all Islamic deposits were
grouped together and there was no segregation of deposit and invest-
ment products. However, IFSA came to clarify the difference between
the investment and deposit products and gave guidelines on the
proper way of treating the investment products. It has reclassified de-
posits account into deposit products and investment products and
term deposit products which is known as tawarruq (commodity mu-
rabaha). In accordance to section 148 of IFSA, Islamic deposit means
a sum of money or any precious metal or precious stone accepted, paid
or delivered in compliance to Shariah principle. Islamic deposits is ei-
ther classified as current or savings accounts whereby the funds can
be repaid or refund in full by instalment or lump sum with or without
any gains. Investment account means an account which is considered
as a provision of financing for the purpose of investment in a Shariah
compliant portfolio and there is no obligation on Islamic bank to repay
the money in full (Ahmad et al., 2020). An investor may get either only

3 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
profits or both profits and losses or he may get with or without any
return (Islamic financial services Act, 2013).
This paper will focus on two main areas:
• The deposit and investment product of Bank Islam, a fully-fledged
shariah compliant in Malaysia and CIMB Islamic Bank, a subsidiary
of CIMB group.
• The qualitative analysis of the deposits in relation to the shariah
contracts for the two banks.
The major interest is to analyse the volumes of the deposit and
investment products and highlight the impact of IFSA on customers’
preference between the products.
Literature Review
Deposits are the cheapest sources of funds for banks and there-
fore, all banks campaign for deposits. Nevertheless, they are still lia-
bility to the bank, and it acts as the main source of funds for bank to
further offer financing product or invest in profitable investment port-
folio. In conventional banking the relationship between the depositors
and the bank is only debtor-creditor relationship. However, in Islamic
banking the relationship depends on the contract used in the deposits
product which mainly consist either wadiah, qard or mudharabah con-
tract (Qaed, 2014).
Firstly, the deposit product or better known as wadiah in Ara-
bic term is a major product in most of the Islamic banking sector.
There are no specific verses referring to the safekeeping in Quran.
However, there is a verse related to trust and the importance of safe-
keeping in which Muslims have been fore-warned to avoid entrusting
positions of responsibility and religious and political leadership to in-
efficient, narrow-minded, immoral and dishonest people. As a result,
doing so the whole community can became corrupt. Muslims should
enjoin to entrust positions of responsibility to qualified and compe-
tent people of good moral character. Furthermore, Allah warns the be-
lievers against injustice and enjoins them always to say what is just
and right and judge between the people with justice whether they be
friends of foes (Surah Al-Nisaa verse 58).
According to Al-Farabi (1987), the term wadiah is derived from
the verb wada’a, which carries the meaning of leave, lodge, deposit or
safekeeping. However, there are some slight differences in the wadiah

4Khan Rahman, IssaZaki Ahmad, Md Mahfujur
definition among the scholars. In the view of Hanafi scholars, it’s de-
fined as an empowerment to someone for keeping the owner’s prop-
erty explicitly and implicitly. Whereas according to Shafi’i and Maliki
scholars, wadiah is presentation in keeping possession of respectable
private goods in specific way. Hanbali scholars includes the element
of charity when they define wadiah as representation in keeping
(other’s property) and it is done (by the keeper) as charity (Qaed,
2014).
According to majority of jurist, wadiah is based on three pillars
which stipulate certain conditions to be complied with, in order for it
to be valid. It is as follows:
1. The declaration (offer and acceptance/ ijab and qabul). All
Muslim scholars unanimously agreed on this condition which is, there
must be a valid offer and acceptance made between both parties.
2. The contracting parties which is the depositors and the
guardian. According to Hanafi School, the attaining age of maturity is
not compulsory provided consent from parents to do business is ob-
tained. However, majority of Muslim jurist’s view is that the contract-
ing parties must be eligible to be a wakalah (agent), which is they must
be a person of sound of mind, and have attained the age of maturity
and intelligence
3. The deposits which is the asset must be valuable property in
Islamic law and can be possessed physically. This is very important
because some asset might be valuable to non-muslim but not to mus-
lim, for instance wines, pork, stolen items, and forbidden things.
(Muhammad, 2016)
Another contract that is also being used in the classical time for
deposits product is qard. Qard is an Arabic word means "to cut", his-
torically the lender cut off part of his or her property to give to the
borrower as a loan. The word hasan is derived from Ihsan which is
translated as splendid or beautiful. Thus, combining these two words
together means beautiful loan. The concept of qard al-hasan is a con-
tract of lending money by a lender to a borrower where the latter is
bound to return an equivalent replacement amount to the lender. Ba-
sically, the loan is given for the welfare purpose and charitable causes
not for the sake of commercial finance. It is to assist the poor or needy
by offering a loan without any interest. While a qard may also be a
bank deposit, which is considered as loan by a depositor and have to
be return upon request (Kabir, 2009).

5 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
On the other hand, mudharabah contract is being adopted in
the contemporary Islamic banking deposit product nowadays.
Mudharabah term is derived from the verse ‘daraba fil ard’ which
means to make a journey. It is clearly stated in Quran that traveling to
earn one’s living by lawful and permissible methods has been de-
scribed as the seeking of Allah’s bounty (Surah Al-Muzammil verse
20).
The word daraba mentioned in this verse indicates travelling
to various part of the world, from place to place for a trading purpose
in seeking Allah’s bounty.
Other Arabic words which have been used interchangeably in
mudharabah are Al-Qirad or muqaradah which means to cut off. It
means the capital provider cuts off some of his money to be utilized
by the manager (mudarib) in certain business activities to generate
some profit that will be distributed between them. The differences be-
tween the terminologies used was based on the geographical factor,
as mudharabah been used by the Iraqis while qirad had been used by
the Hijazis. (Lahsasna, 2013).
The Malikis look at mudharabah contract from the legal per-
spective, it is defined as an agency for trading. However, the Shafi’i and
Hanbali describe it as an agreement where the capital is provided by
the rab al-mal and traded by the workers then the profit is shared
among them. The most comprehensive definition of mudharabah was
by the Hanafi School of law. It defines mudharabah as a partnership
for participation in profit which the capital is provided by one sided
and the labour skill is from the other side.
The Hanafi’s record only forms (offer and acceptance) as the
element of mudharabah. In this sense, the Majalla stipulates (art.
1405) “The basis of a mudharabah is offer and acceptance”. While the
majority of jurists’ list three elements for the contract of mudharabah:
Parties to the contract (rab al-mal and mudarib), subject matter (cap-
ital, work and profit) and form (offer and acceptance) (Lahsasna,
2013).
Deposit and Investment Products in Islamic Banks
Islamic Banks like conventional banks have current accounts,
savings accounts (CASA) and term deposit accounts. Banks have dif-
ferent names for the deposit products but in essence they all fall under

6Khan Rahman, IssaZaki Ahmad, Md Mahfujur
3 categories which are; current accounts, savings accounts, term de-
posit accounts. Before IFSA, the shariah contracts used are wadiah yad
dhamanah, qard and mudharabah. All the deposits were protected by
Perbadanan Insurans Deposit Malaysia (PIDM). (Amin H. , 2013).
One salient feature of IFSA is the defining of the bank’s funding
into deposit funds and investment funds. Prior to this new law, expo-
sures funded by deposit funds had to be protected even when such
deposits were based on mudharaba. As equity funds, investment ac-
counts (IA) are expected to stimulate profit-loss sharing financing and
enhance entrepreneurship in the real sector (Rosly, 2016).
The transition exercise of segregating deposit products with
investment accounts in Islamic banks took two years transition pe-
riod. The parties affected by the transition are depositors and inves-
tors who hold mudharabah, and wakalah based current and saving de-
posit and investment products (Bank Islam Malaysia Berhad, 2014).
The customers with mudharabah or wakalah accounts were
given the option to retain as investment products where the features
of investment accounts will prevail or convert them to deposit or term
deposit-i accounts under wadiah or tawarruq products (Bank Islam
Malaysia Berhad, 2014).
The distinctive features of investment and deposit
products according to IFSA
• The shariah contracts differ in Islamic deposits compared to In-
vestment products. The Islamic deposits are governed by wadiah,
qard, murabahah and tawarruq. Whilst the investment products
are governed by mudharabah, musharakah and wakalah.
• Islamic deposits are principal guaranteed Shariah contracts such
as qard, wadiah, murabahah and tawarruq; and principal non-
guaranteed Shariah contracts such as mudharabah and waka-
lah(Abdul Ghafar Ismail, 2016)
• The forms of return in Islamic deposits are in form of hibah for
the CASA while for term deposits are in form of mark-up (i.e. prin-
cipal and profit). As for the investment accounts, the returns are
in form of pre-agreed profit-sharing ratios for mudharabah and
musharakah accounts. In mudharabah, the rab al-mal, in this case
the investing customers are the loss bearers (Amin, 2016). While
musharakah, the loss is born by both parties in proportion to their

7 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
capital (Usmani). A brief explanation of each type of accounts is
given below.
Deposit Products
a) Current accounts
For Islamic banks, it is termed as Current accounts-i to signify
that it follows the shariah principles. According to (Amin H. , 2013)
current accounts are called check accounts in US because customers
use cheques to make payment. This means that customers are eligible
to receive cheque books when opening current accounts. The purpose
of the current accounts is to facilitate customers be it businesses or
individuals to transact and not for investment purposes. For this rea-
son, the applicable contract is wadiah yad dhamanah which the funds
are placed with the bank for safe keeping purposes. This contributes
to the fact that; the principal is guaranteed. However, the bank uses
the customers’ deposits in short term financing with other banks to
assist in liquidity of the banks. Out of the bank’s appreciation to the
customers and also because of competition by the conventional coun-
terparties, Islamic banks may give hibah to the customers. However,
it is at the bank’s discretion. The determination of hibah rate is based
on the performance of the bank, size of the deposit, period of the sav-
ing and the policy of the bank, which may differ from one bank to an-
other (Amin H. , 2013).
b) Savings Accounts
Savings account-i product offered through the shariah princi-
ples of wadiah or qard. It encourages customers to retain their money
and use it when needed. The customers with savings account have no
intentions of investment and therefore do not expect any returns.
However, since the bank uses the funds and invest them in short term
projects at their own risk, they give the customers hibah depending on
the bank’s policy (Amin H. , 2013).
c) Term Deposit Accounts
As the name suggests, it is money placed with the bank for a
certain period of time and it’s for investment purposes. The customer
is restricted from withdrawal until the term matures. With the IFSA,

8Khan Rahman, IssaZaki Ahmad, Md Mahfujur
the term deposits cannot be structured under mudharabah and guar-
antee the principal. For the customers who are not willing to accept
risk of losing the principal in case of loss, tawarruq (commodity mura-
baha) contract was proposed for this deposit.
d) Investment Account
IFSA distinguishes investment account from Islamic deposit,
where investment account is defined by the application of Shariah
contracts with non-principal guarantee feature for the purpose of in-
vestment. (Bank Negara Malaysia, 2014). The Investment Account
holders (IAH) have other rights compared to the deposit holders; for
instance, IAH is given more priority to deposit holders at liquidation.
The shariah contracts used in investment accounts are mudharabah,
musharakah and wakalah. There are two types of investment ac-
counts; Restricted investment account (RIA) and Unrestricted Invest-
ment account (URIA) according to IFSA. RIA refers to a type of invest-
ment account where the IAH provides a specific investment mandate
to the IFI such as purpose, asset class, economic sector and period for
investment. While the URIA refers to a type of investment account
where the IAH provides the IFI with the mandate to make the ultimate
investment decision without specifying any particular restrictions or
conditions (Bank Negara Malaysia, 2014).
CIMB Bank
An analysis of the deposit structure of two banks i.e. CIMB Is-
lamic and Bank Islam was done. The analysis comprises of the prod-
ucts features and benefits in relation to IFSA. It also compares the de-
posit and investment volumes of two consecutive financial years;
2014 and 2015. CIMB Islamic is a subsidiary of CIMB group. CIMB
group has both conventional and Islamic banks. CIMB Islamic started
functioning since 2008 and it serves 13 million customers with
ASEAN's largest retail network of over 800 branches (CIMB Islamic
Bank Berhad, 2017)

9 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Features and Benefits of Deposit Products
a) Current Accounts
CIMB Islamic bank has four different types of current ac-
counts tabulated below. The shariah contract, the features and bene-
fits are mentioned for each account.
Table 1: Different types of current accounts, CIMB Islamic Bank Website
Type of
Account
Shariah
Contract
Minimum
Deposit
Benefits
Features
Basic
Current
Account-
i
Wadiah
Yad Dha-
manah
Minimum
initial de-
posit is re-
quired.
Hibah
given at
the bank’s
discre-
tion.
• For Individual Malaysia Citizen and per-
manent resident of 18 years and above.
• Cheque book given
• ATM for individuals only
• Free Monthly statement of account
• Internet Banking Facilities
• Eligible for PIDM protection
• Applicable to Small and Medium Enter-
prises.
• Joint Account is allowed.
Pre-
ferred
Current
Account-
i
Wadiah
Yad Dha-
manah
RM 1,000.
Hibah
given at
the bank’s
discre-
tion.
• For member of CIMB Preferred.
• Daily ATM Withdrawal up to RM10,000
• Unlimited Cash Withdrawal
• SMS Alerts on account status.
• Online Banking via CIMB Clicks.
• Member for PIDM protection.
• Cheque book issued
Foreign
Currency
Current
account-i
Qard
• Available in US (USD), Sterling Pound
(GBP), Japanese Yen (JPY), Australian
Dollar (AUD), New Zealand Dollar (NZD),
Singapore Dollar (SGD), Swiss Franc
(CHF), EURO (EUR), Canadian $ (CAD),
Hong Kong Dollar (HKD), Chinese Yuan
(CNH) And Thai Baht (THB).

10Khan Rahman, IssaZaki Ahmad, Md Mahfujur
• Eligible for individuals aged above 18
years, residents or non-residents.
• Business operating in Malaysia.
Wadiah
Current
account-i
Wadiah
Yad dha-
manah
RM 500 for
individu-
als and RM
1,000 for
compa-
nies, firms
and associ-
ations.
• Cheque book given
• Free Monthly statements
• ATM withdrawal up to RM 5,000
• Internet Banking Facility
• Eligible for PIDM protection
• Individuals aged 18 years and above for
personal and joint account.
• Eligible for firms, associations, compa-
nies, societies or clubs.
b) Savings Account
The Bank has eight different types of savings accounts tabled
below. The product features and benefits are highlighted below.
Table 2: Different types of savings accounts, CIMB Islamic Bank
Website
Types of ac-
count
Shariah
contract
Mini-
mum de-
posit
Benefits
Features
Saving Ac-
count-i plus
Tawarruq,
(Commodity
Murabaha)
Profit given by
bank.
• Statements-based saving
account with debit card
• ATM withdrawal limit up to
10,000
• Internet banking,
• Min. Balance or RM 20 at all
times,
• Principal protected by
PIDM
Basic Saving
Account-i
Qard
Bank give hibah
• Pass book,
• Has ATM card,
• guaranteed principal de-
posit,
• Internet banking,

11 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Wadiah saving
account
Wadiah Yad
Dhamanah
Bank give hibah
• Pass book with Debit card
• ATM withdrawal limit up to
RM 5,000
• Principal deposit guaran-
teed
• Internet banking
• 20RM at all times
Wadiah Chil-
dren Saving
Account-i
Wadiah Yad
Dhamanah
RM 500
Bank give hibah
• Guaranteed deposit princi-
pal
• Once a month unlimited
withdrawal
Wadiah teen-
age saving ac-
count-i
Wadiah Yad
Dhamanah
Bank give hibah
• Pass book with debit card
• guaranteed deposits prin-
ciple
• ATM withdrawal up to RM
500 per day
Eco Saving Ac-
count-i
Wadiah Yad
Dhamanah
Bank give hibah
• Internet banking platform
• Debit Card
• Environmentally friendly
• Eligible for PIDM protec-
tion
YOUth Savers
Accounts-i
Wadiah Yad
Dhamanah
Bank give hibah
• Online banking
• Debit Master Card-i
• Eligible for PIDM protec-
tion
Junior Savers
Account-i
Wadiah Yad
Dhamanah
Bank give hibah
• Saving passbook,
• Only OTC withdrawal al-
lowed
• Eligible for PIDM protec-
tion
c) Term Deposit Account
There are four different types of term deposit accounts. The
contract mainly used is tawarruq (commodity murabaha) and the

12Khan Rahman, IssaZaki Ahmad, Md Mahfujur
minimum deposit is RM 10,000. The features and benefits are high-
lighted below.
Table 3: Different types of term deposit accounts, CIMB Islamic Bank
Website
Types of account
Shariah contract
Mini-
mum de-
posit
Benefits
Features
Fixed return in-
come Account-
i(FRIA-i)
Tawarruq (com-
modity murabaha)
RM
10,000
Determined
Fixed and profit
upfront
• Maturity period
1,2 and 3 month
• Partial with-
drawal unavaila-
ble
• Premature up-
liftment.
• Eligible for PIDM
• Tenor of deposit
1 to 60 month
Fixed Return In-
come Account-
i(FRIA-i)-
Monthly Returns
Tawarruq, Com-
modity Murabaha
RM
10,000
Profit is deter-
mined and up-
front
• Partial with-
drawal with
great profit rate
3.9%p.a. for 6
month, 4.1%p.a.
for 12 months,
• Min. Withdrawal
Rm1,000,
• Eligible for PIDM
protection
Fixed Return In-
come Account-i –
Maturity Returns
Tawarruq and Mu-
rabaha vis-vis com-
modity Murabaha
RM
10,000
Fixed upfront
and predeter-
mined profit.
• Minimum With-
drawal 1,000
• Tenor between
1- 60 month
• Eligible for PIDM
protection

13 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Foreign Currency
Fixed Return In-
come Account-i
Tawarruq, Com-
modity Murabaha
Higher profit
rate
• US Dollar, Aus-
tralia Dollar &
Euro will be
available cur-
rency,
• Deposits and
withdrawals,
• Eligible for PIDM
protection.
e) Investment Accounts
The Bank has three types of investment accounts for different cate-
gory of customers. Some of the investment accounts are linked to fi-
nancing like the Special Mudharabah investment account-i. The ac-
count is linked to flexi-home financing facility. More details on the ac-
counts is given below.
Table 4: Different types of Investment accounts, CIMB Islamic Bank
website
Types of
account
Shariah
contract
Minimum
Initial In-
vestment
Benefits
Features
Special
Mudhara-
bah Invest-
ment Ac-
count-I
(SMIA)
Unrestricted
Investment
account.
RM 50.00
• Profit sharing ratio
is (5:95) where 5%
is customer’s share
and the 95% is
bank’s share.
• Profit is distrib-
uted on monthly
basis.
• Profit is subject to
the asset where the
funds are invested.
• Enjoy monthly re-
turns while get sav-
ings on the flexi-
home financing.
• No specific tenure for
investment.
• Individual (Malay-
sian Citizens and For-
eigners) & Business
Entities.
• It’s only applicable to
customers with Flexi
Home Financing-i
and Flexi Business
Premises Financing-i
where they will earn

14Khan Rahman, IssaZaki Ahmad, Md Mahfujur
returns against their
savings and will also
reduce the finance
charges.
• Not eligible for Per-
badanan Insurans
Deposit Malaysia
(PIDM) protection.
In-
vestSmart-i
Both using
the invest-
ment and Is-
lamic unit
trusts.
• Profit may go as
high as 48.85%
• Combines the secu-
rity of investment
account and the
power of unit trust
to boost your over-
all investment po-
tential returns.
• Flexible investment
tenure
• The ratio is the in-
vestment is 60:40
where 60% of invest-
ment is in selected Is-
lamic unit trusts and
the 40% is in invest-
ment account.
• Eligible for 18 years
old & above
• Eligible for Malaysian
or Permanent Resi-
dent or non-Perma-
nent Resident (with
work permit)
Max In-
vestSave
Profit Shar-
ing Specific
Account-i
Restricted
Mudharabah
account
RM 50
• Profit sharing of
95:5 where 95% is
the customer and
5% is the bank.
• Enjoy highest re-
turn achieved
when held until
maturity
• Withdraw any
amount, any time at
the prevailing market
price.
• Redeem in part or in
full (minimum 0.01
units)
• Investment tenors
are 15, 20, 25 or 30
years.
• Principle is eligible
for PIDM protection

15 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
and the amount is de-
pendent on PIDM
from time to time.
• Performance de-
pends on CIMB ever-
green index
From the information above, CIMB Islamic have so many prod-
ucts under the current, savings and term deposit accounts to cater for
different type of customer. The differentiating factors in the products
are the features which are made very flexible for the customers. For
instance, the current and savings accounts require low minimum de-
posit to attract as much deposits as possible while the term deposit
accounts require minimum deposit of RM 10,000. The term deposit
accounts target customers with so much liquidity and wish to invest
and earn returns on their investment. The underlying contract is ta-
warruq, whereby the principal is guaranteed.
The shariah contracts used by CIMB Islamic are wadiah yad
dhamanah, qard and tawarruq for the deposit products. One common
feature in all the deposit products is the PIDM protection which guar-
antees the principal, while the investment accounts are not principally
guaranteed. Each account has its own benefits, for the investment
products, the main benefit is the profit earned which is shared be-
tween the customer and the bank, the current and savings products
are not entitled to receive any profits unless the bank wishes to pro-
vide hibah to its customers. However, they have other benefits like in-
ternet banking, entitled to get cheque book etcetera depending on the
product.
After seeing the different products offered by CIMB Islamic
bank, an analysis is done on the bank’s deposits in comparison to the
shariah contracts used to evaluate the contract mostly used by the
bank.
The extract below from the annual report of CIMB Islamic
Bank shows the bank’s deposits in accordance with the shariah con-
tracts used.
Table 5: Note 19 of the Financial Statements for the year 2015, CIMB
Islamic bank annual report 2015.

16Khan Rahman, IssaZaki Ahmad, Md Mahfujur
The extract below shows the investment funds from the cus-
tomers in form of restricted or unrestricted investment accounts.

17 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Table 6: Note 20 of the Financial Statements for the year 2015, CIMB
Islamic bank annual report 2015.
The two figures 1 and 2 are pie charts below demonstrate the
share of the deposit and investment funds according to the shariah
contracts used by the CIMB Islamic Bank in the year 2015 and 2014.

18Khan Rahman, IssaZaki Ahmad, Md Mahfujur
Figure 1: Authors presentation: Pie Chart demonstrating different
contracts applied in deposit and investment products, CIMB Islamic
Bank, 2015
25%
1%
6%
1%
66%
1%
CIMB Islamic Bank
Deposit and Investment Value for Financial Year 2015
Wadiah
Qard
Mudharaba Restricted
Mudharabah Unrestricted
Commodity murabahah
Others

19 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Figure 2: Authors presentation: Pie Chart demonstrating different
contracts applied in deposit and investment products, CIMB Islamic
Bank, 2014
From the analysis above, it shows that before implementation
of IFSA, the popular shariah contract used was commodity Murabaha
(tawarruq) which was around 53% in 2014. The deposits under com-
modity murabaha then increased to 66% in the year 2015, this in-
crease is mainly attributed by the reduction of the deposits under wa-
kalah contracts which was at 14% in the year 2014 and in the year
2015, it reduced to 0%.
The mudharabah investment accounts were introduced in the
year 2015. There are two types; restricted mudharabah and the unre-
stricted mudharabah investments. The funds in the restricted
mudharabah were invested in other term financing, marketable secu-
rities and other assets (CIMB Islamic Bank Berhad, 2015).
The percentage deposit value is very high compared to the in-
vestment value in both 2014 and 2015.The percentage of the deposit
value is 92% and the investment value is 4% in 2015. In 2014, the per-
centage of the deposit value is 76% and the investment value is 24%
53%
23%
1%
3%0%
14% 6%
CIMB Islamic Bank
Deposit and Investment Value for Financial Year 2014
Commodity Murabaha
Wadiah
Mudharabah Restricted
Mudharabah Unrestricted
Qard
Wakalah
Others

20Khan Rahman, IssaZaki Ahmad, Md Mahfujur
of the total deposits. It is evident that the deposit funds increased fur-
ther in 2015 and the main shariah contract used is commodity mura-
baha.
Bank Islam
The government of Malaysia has taken a proactive action by
establishing Bank Islam Malaysian Berhad (BIMB) in 1 July 1983. It is
the first Islamic Bank founded in Malaysia and even in ASEAN region.
The main objective of setting up this important financial institution is
to assist the Muslim financial needs in Malaysia. By adapting service
excellence culture, Bank Islam continues to cater different needs of
the customers as it strives to uphold its status to become the symbol
of Islamic banking in Malaysia.
With over 70 innovative and advanced ranges of product and
services, BIMB offers a comprehensive financial solution for more
than 5 million of its customers. The products range from the tradi-
tional financing, savings and investment solutions exclusively for in-
dividual customers. However, this paper will highlight and elaborate
on BIMB deposits and investment products which represented the li-
ability side of the bank account.
a) Deposit Product
BIMB has five different types of deposit products where two
are current accounts, two savings accounts and one term deposit ac-
count. The main shariah contract used is Wadiah Yad Dhamanah. The
table below shows the features and benefits for each account.
Table 7: Different types of deposit products, Bank Islam Website.
Name of prod-
uct
Applicable
Shariah Con-
tract
Minimum
deposit
Benefits
Features
Wadiah Sav-
ings Account-i
al-Wadiah
( safe custody)
RM10.00
Hibah may
be given on
a monthly
basis based
on the
Bank’s dis-
cretion
• Free Savings Passbook
• Bankcard Facilities
• Salary Crediting & Sweep-
ing Facility
• Standing Instruction Facil-
ity
Others facilities:
• Bill payment

21 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
• bankislam.biz
• TAP Mobile Banking-i
Basic Saving
Account-i
Wadiah Yad
Dhamanah
RM 20.00
Bank at its
own discre-
tion to
grant Hibah
• ATM and over-the-counter
(OTC) withdrawals
• Fund transfers and bill pay-
ment facilities
Wadiah Cur-
rent Account-i
Wadiah Yad
Dhamanah
Minimum
RM500.00
initial de-
posit for in-
dividual ac-
count and
RM1,000.00
for non-indi-
vidual ac-
count
Bank at its
own discre-
tion to
grant Hibah
Protected
by Per-
badanan In-
surans De-
posit Ma-
laysia
(PIDM)
• Cheque Book, ATM/Debit
Card
• Facilities, Salary Crediting
• Sweeping Facility
• Standing Instruction, Bill
Payment,
• Internet Banking, TAP-
Mobile Banking, e-Debit,
MEPS Cash, IBG, Cash line-i
(Islamic Overdraft), Access
to Tabung Haji
Basic Current
Account-i
Wadiah Yad
Dhamanah
RM 500.00
Bank at its
own discre-
tion to
grant Hibah
• Cheque and cash deposit
• ATM and over-the-counter
(OTC) withdrawals
• Fund transfers and bill pay-
ment facilities
• Issuance of cheque with NO
overdraft facilities
Term deposit-
i
Tawarruq
RM1,000 for
1 month
RM500 for 2
months &
above
Upon ma-
turity (ten-
ure up to 1
year)
Half-yearly
profit pay-
• A term deposit product
with a fixed profit rate. The
profit is derived from the
commodity purchase and
sale transactions based on
the profit rate determined
upfront.

22Khan Rahman, IssaZaki Ahmad, Md Mahfujur
ment (ten-
ure above 1
year)
b) Investment Account.
BIMB has two types of investment accounts. The features and
benefits of the accounts are tabled below.
Table 8: Different types of Investment products, Bank Islam Web-
site.
Name of
product
Applicable
Shariah
Contract
Type of in-
vestment ac-
count
Investment Ten-
ure
Return on IAH
Wafiyah
Investment
Account
Wakalah
Bil Istith-
mar Con-
tract
Unrestricted
Investment
Account
Minimum 1
month- maximum
6 months
Product Expected
Rate
Of Return
Wafiyah 1 month 3.60
Wafiyah 3 months 3.70
Wafiyah 6 month 3.80
Al-Awfar
Account
Mudhara-
bah Con-
tract
Unrestricted
Investment
Account
No fixed mini-
mum or maxi-
mum tenure
Profit sharing ratio
Bank: Customer
98:2
From the information above, just like CIMB Islamic bank, Bank
Islam also uses wadiah yad dhamanah and tawarruq for deposits. As
for the investment products, it uses mudharabah and wakalah bil-Isti-
thmar. There is equal distribution of profit between the bank and the
customer.
After the deposit and investment products features are given
above, an analysis is done on the bank’s deposits in comparison to the

23 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
shariah contracts used to evaluate the contract mostly used by the
bank.
The extract below from the annual report of BIMB Bank shows
the bank’s deposits according to the shariah contracts used.
Table 9: Note 15 of the Financial Statements for the year 2015, Bank
Islam annual report 2015.
The extract below shows the investment funds from the cus-
tomers in form of restricted or unrestricted investment accounts.
Table 10: Note 16 of the Financial Statements for the year 2015,
Bank Islam annual report 2015.

24Khan Rahman, IssaZaki Ahmad, Md Mahfujur
The two figures 3 and 4 are pie charts below demonstrate the
share of the deposit and investment funds according to the shariah
contracts used by the Bank Islam in the year 2015 and 2014
41%
0%
1%
48%
1% 9%
0%
Bank Islam
Deposit and Investment value for Financial Year 2015
Wadiah
Mudharabah Special Investment
Mudharaba General Investment
Tawarruq
Wakalah
Negotiable Islamic Debt
Certificates (NIDC)
others

25 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Figure 3: Authors presentation: Pie Chart demonstrating different
contracts applied in deposit and investment products, Bank Islam,
2015
Figure 4: Authors presentation: Pie Chart demonstrating different
contracts applied in deposit and investment products, Bank Islam,
2014
From the analysis above, it shows that the popular contract used is
tawarruq (commodity murabaha). In the year 2014, deposits under
tawarruq were 43% of the deposit which increased to 48% in 2015.
Generally, the deposits value against investment deposits increased
from approximately 85% in the year 2014 to almost 98% in the year
2015.
Conclusions
From the analysis of the annual reports, it is evident that the
investment products are less taken compared to deposit products. All
the products offered by CIMB Islamic bank and Bank Islam comply
with IFSA guidelines. The distinctive features of the deposit products
and investment products are well communicated to the customers.
33%
5%
12%
3%
43%
3%
1%
Bank Islam
Deposit and Investment Value for Financial Year 2014
Wadiah
Mudharabah Deposit
Mudharabah Special Investment
Mudharaba General Investment
Tawarruq
Negotiable Islamic Debt
Certificates (NIDC)
Others

26Khan Rahman, IssaZaki Ahmad, Md Mahfujur
The customers’ purpose of depositing the funds with the bank is de-
termined at the point of opening the account and based on the inten-
tion, the correct contract (‘aqd) applies. The customers are advised on
the account to open depending on the purpose of opening the account.
The results above show that the investment volumes are very low
compared to the deposit volumes which can be attributed to many
reasons. One of them can be customer’s unwillingness to take risks.
The other reason can be lack of knowledge and information on the in-
vestment products. Further research can be done to investigate the
customers’ perception towards the investment accounts and under-
stand the reasons as to why the uptake of investment products is very
low compared to the deposit products.
BIBLIOGRAPHY
Abdul Ghafar Ismail, N. A. (2016). Tawarruq time deposit with wakalah
principle: an option that triggers new issues. International Journal
of Islamic and Middle Eastern finance and Managment. vol 9, 388-
396.
Ahmad, Z., Zahir, F., Usman, A. M., Muneeza, A., & Mustapha, Z. (2020).
An exploratory study on the possibility of replacing tawarruq based
Islamic banking products using other alternatives. International
Journal of Management and Applied Research, 7(2), 147-164.
Amin, A. P. (2016, December). Fallacies of Islamic deposit and
investment accounts in Sabah. Retrieved from Islamic
Banker.com: https://www.islamicbanker.com/articles/fallacies-of-
islamic-deposit-and-investment-accounts-in-sabah
Amin, H. (2013). Some Viewpoints of Islamic Banking Retail Deposit
Products in Malaysia. Journal of Internet Banking and Commerce,
1-14.
Bank Islam Malaysia Berhad. (2014). Reclassifying Islamic Deposits
under the Islamic Financial Services Act 2013 What you need to
Know. Kuala Lumpur.
Bank Islam Malaysia Berhad. (2015). 2015 Annual Report.

27 An Insight into Investment and Deposit Products Offered by Islamic
Banks in Malaysia
Bank Negara Malaysia. (2014, March 14). Investment account. Retrieved
from
http://www.bnm.gov.my/guidelines/01_banking/04_prudential_st
ds/investment_account.pdf
CIMB Islamic Bank Berhad. (2015). Reports and Financial Statements for
the financial year ended 31st December 2015.
CIMB Islamic Bank Berhad. (2017). cimbislamic.com. Retrieved from
CIMB Islamic- Banking, Finance, Financing, Securities,
Businesses: http://www.cimbislamic.com
Islamic Banking Act 1983. (1983, March 10). Retrieved March 25, 2017,
from Laws of Malaysia:
http://www.bnm.gov.my/documents/act/en_ib_act.pdf
Islamic financial services Act. (2013, March 22). Retrieved March 24,
2017, from Laws of Malaysia:
http://www.bnm.gov.my/documents/act/en_ifsa.pdf
Kabir, A. U. (2009). iefpedia.com. Retrieved from
http://iefpedia.com/english/wp-content/uploads/2009/11/The-
Time-Value-of-Money-Concept-in-Islamic-Finance.pdf
Khan, I., Muneem, A., Mansor, F., Mohd, M. A. W. F. B., Balwi, M., &
Rahman, M. (2021). Critical Review on Issues and Challenges of
Malaysian Islamic financial system. Journal of Southwest Jiaotong
University, 56(2).
Lahsasna, D. A. (2013). SH1003: Shariah Rules in Financial Transactions
Enhanced Edition of CIFP Module 2012. Kuala Lumpur:
International Centre for Education in Islamic Finance (INCEIF).
Laws of Malaysia. (1983, March 10). Retrieved March 25, 2017, from
Islamic Banking Act 1983:
http://www.bnm.gov.my/documents/act/en_ib_act.pdf
Muhammad, M. (2016). Islamic Financial System; Principle and
Operation. Kuala Lumpur: International Shariah Research
Academy for Islamic Finance (ISRA).

28Khan Rahman, IssaZaki Ahmad, Md Mahfujur
Nor, A.M, Osman, A.F, Ahmad, N. H., Rahman, M.M, & Bakar, A. A
(2019). The Impact of Bank Specific Factors On Impaired
Financing: Comparative Analysis Between Islamic and
Conventional Banks in Malaysia. Journal of Humanities,
Language, Culture and Business, 3 (12), 92,
Qaed, I. Q. (2014). The concept of wadiah and its application in Islamic
Banking . Jounal of research in Humanities and Social Science
Volume 2, 70-74.
Rosly, S. A. (2016). Credit-Risk Sharing in Islamic Banking: The Case of
Islamic Deposits and Investment accounts in Malaysia. Middle
East Insights IFS 5, 1-20.
Usmani, D. M. (n.d.). The Concept of Musharakah. Retrieved from Alhuda
CIBE: www.alhudacibe.com