Infrastructure Financing through Islamic
Finance in the Islamic Countries
98
As discussed in Chapter 2, the World Bank identifies three stages of procurement regimes.
Chart 4.2.8 shows the status of the procurement regime for PPPs in Malaysia in terms of
preparation, procurement and contract management relative to different income groupings in
the East Asia & Pacific region. While the status of the preparation stage for PPPs is relatively
good in Malaysia with a score of 50 which is higher than all country groupings except high
income countries, the procurement and contract management of PPPs achieves relatively low
scores of 42 and 33 respectively. The chart shows that while Malaysia’s score for the
preparation stage is better than the average OIC members, the procurement and contract
management scores are lower.
Chart 4.2. 8: Procurement Regime of PPPs: Malaysia (1-100 Highest)
Source: WB (2018f).
4.2.4.1. Laws and Regulation Supporting Islamic Finance
The Malaysian government has been very supportive of the Islamic financial industry and has
instituted a sound legal and regulatory framework and institutional setup for its development
and growth. The Islamic Banking Act 1983 (IBA 1983) was legislated in 1983 to provide the
legal basis for Islamic banks, and the Takaful Act 1984 was legislated to govern the
establishment and regulation of takaful companies. The Banking and Financial Institutions Act
1989 (BAFIA amended 1993) was amended to accommodate Islamic banking practices in
conventional banks to carry out Islamic banking business through windows. The Islamic
Financial Services Act 2013 (IFSA 2013) updated and consolidated the legal framework for
Islamic banks and the takaful sector by repealing IBA 1983 and Takaful Act 1984. IFSA 2013
provides robust legal foundations for the development of a stable Islamic banking and takaful
sector by reinforcing the regulatory and supervisory framework to foster the soundness of
financial institutions and strengthen the business conduct, consumer protection and integrity
0
10
20
30
40
50
60
70
80
High income Upper-middle
income
Lower-middle
income
Low income East Asia &
Pacific
OIC Members
(40)
Malaysia
63
49
45
39 40
43
50
77
64
58
54 53 55
42
58 57
52
47 46
51
33
index value (1-100 Highest)
Preparation Procurement Contract management