Licensed Islamic Banks in Malaysia: The Official Picture

Where the official list comes from

Bank Negara Malaysia (BNM) publishes the authoritative register of licensed institutions on its website, split into commercial banks, Islamic banks, international Islamic banks, investment banks and development financial institutions. Any entity missing from that register cannot legally accept Islamic deposits.

Third-party lists, including encyclopaedia pages, often lag behind mergers and name changes. Before opening an account or signing a financing offer, compare the bank name on the letter of offer with the current BNM register and the licence category shown there.

Which Islamic banks are licensed today?

The Islamic banking category covers sixteen fully-fledged Islamic banks. Most are subsidiaries of domestic groups: Maybank Islamic, CIMB Islamic, Bank Islam Malaysia, Bank Muamalat, RHB Islamic, Public Islamic, Hong Leong Islamic, AmBank Islamic, Affin Islamic, Alliance Islamic and MBSB Bank.

Foreign-owned licensees include Kuwait Finance House (Malaysia), Al Rajhi Banking and Investment Corporation (Malaysia), OCBC Al-Amin, HSBC Amanah Malaysia and Standard Chartered Saadiq. BNM also licensed Islamic digital banks in 2022, among them AEON Bank and KAF Digital Bank.

Looking beyond the sixteen banks

Development financial institutions such as Bank Rakyat, a cooperative bank operating entirely on Shariah principles, also serve households. They are regulated under the Development Financial Institutions Act 2002 rather than IFSA, yet remain supervised by BNM and widely used for home and personal financing.

Takaful operators form a separate licence class under the same IFSA framework. When a bank requires Mortgage Reducing Term Takaful with a home financing facility, the cover is written by one of these licensed operators, not by the bank itself.

Governing Shariah questions centrally

Malaysia differs from most markets because the Shariah Advisory Council of BNM, set up under the Central Bank of Malaysia Act 2009, issues rulings that bind banks and courts. Each bank still keeps its own Shariah committee, but it cannot contradict the national council on core issues.

How home financing-i is structured

Most Islamic home financing now uses tawarruq, also called commodity murabahah. The bank buys a Shariah-compliant commodity, such as crude palm oil, sells it to the customer on deferred terms at cost plus profit, and the customer immediately sells it on for cash used to pay the seller.

Some banks still offer musharakah mutanaqisah, a diminishing partnership in which the customer buys the bank’s share in stages while paying rent on the unbought portion. Older contracts used bai’ bithaman ajil, a deferred sale that BNM policy has gradually displaced.

What the profit rate is pegged to

Variable home financing-i is priced as a margin over the Standardised Base Rate (SBR), which since 2022 is linked to the Overnight Policy Rate. Bank Islam’s Baiti product, for example, quotes SBR plus a margin and states the effective profit rate on its product page.

A ceiling profit rate is written into the contract. The bank may charge less than the ceiling when rates fall, but it cannot exceed it, which is how the deferred sale price remains fixed while instalments float, as Shariah requires.

Legal and tax treatment for buyers

Stamp duty applies to the transfer instrument on a sliding scale from one to four percent for citizens, and to the financing agreement at the standard rate. Malaysian legislation removes any double stamp duty that a two-step Islamic sale would otherwise trigger.

Real property gains tax, legal fees under the Solicitors’ Remuneration Order, valuation fees and the takaful contribution sit on top. Foreign purchasers face state-level minimum price thresholds and state consent, which some Islamic banks treat as additional eligibility filters.

Rebates and late payment rules

BNM’s ibra’ policy obliges Islamic banks to grant a rebate of unearned profit when financing is settled early, so customers do not pay the full deferred sale price. Late payment compensation, known as ta’widh, is capped by BNM and cannot be compounded.

Checking a bank step by step

1. Open the BNM list of licensed Islamic banks and note the exact legal name of the institution you are considering.
2. Confirm that the product name carries the “-i” suffix and that the offer letter names the Shariah contract used.
3. Ask for the product disclosure sheet, which BNM requires before you sign any retail financing.
4. Compare the effective profit rate, ceiling rate and margin of financing with at least two other licensed Islamic banks.
5. Check whether takaful cover is compulsory and which licensed takaful operator provides it.
6. Verify deposit protection by confirming the bank is a member of Perbadanan Insurans Deposit Malaysia (PIDM).
7. Keep the signed sale and purchase documents, as the commodity trade confirmations form part of the contract.

Typical costs and paperwork

Is deposit insurance the same?

Islamic deposits at member banks are protected separately by PIDM, up to RM250,000 per depositor per member bank. Investment accounts, where the customer shares profit and loss under mudarabah or wakalah, are not deposits and are not protected in the same way.

Errors that lead to refusals

• Assuming a bank is Islamic because of its name, without checking the BNM licence category.
• Applying with a debt service ratio far above the bank’s internal limit once existing car and card financing are added.
• Confusing investment accounts with protected Islamic deposits and expecting capital guarantees.
• Choosing a property that the bank cannot accept as collateral, such as land with restrictions on transfer.
• Ignoring the ceiling profit rate and focusing only on the initial effective rate.

Comparing domestic and foreign banks

Domestic groups generally have larger branch networks and more products for government employees through salary deduction schemes. Foreign-owned Islamic banks tend to focus on urban customers, priority banking and cross-border transfers, so the best choice depends on where you live and work.

Practical tips from the market

Online comparison portals such as RinggitPlus or iMoney reprint bank rates, yet they are not regulators. Always rely on the product disclosure sheet issued by the bank itself and the BNM register, especially when a broker promises approval in advance.

Can non-Malaysians use these Islamic banks?

Yes. Foreign residents with a valid work pass can usually open Islamic accounts and apply for home financing-i, but banks apply stricter margins and require proof of income in Malaysia. State consent and foreign-buyer price floors must be satisfied before the bank releases funds.

Does an Islamic bank cost more than a conventional one?

Not necessarily. Profit rates on home financing-i track the same benchmark as conventional loans, and published effective rates are often identical. Differences appear in fees, takaful requirements and early settlement rebates, so compare the full product disclosure sheets.

How often does the official list change?

Changes are infrequent but real: mergers, conversions such as MBSB Bank, and new digital Islamic bank licences have all altered the register in recent years. BNM updates the online list whenever a licence is granted, revoked or transferred.

Where can complaints be taken?

Start with the bank’s own complaints unit. If the answer is unsatisfactory, the Ombudsman for Financial Services handles disputes involving Islamic banks, while BNM’s BNMTELELINK channel deals with conduct concerns and suspected unlicensed operators offering “Islamic” schemes.