A Composition of Islamic Personal Financing in Islamic Banks and Conventional Banks and the Products Offered

Islamic personal financing (IPF) has now effectively been a part of the Malaysia Islamic banking industry providing alternative to traditional loans, which are in the form of Shariah acceptable contacts. But few studies have been conducted on the dissimilarity of the structure, disclosure and growth of personal financing between conventional and Islamic banks. The paper is an attempt to compare the personal financing in the two financial systems (Islamic and conventional), taking into consideration the kind of products on the market and the kind of contracts used. This study analyses annual reports of the Islamic and conventional banks and publications of the Bank Negara Malaysia on a timeframe of 2018 to 2023. The results indicate that the conventional banks have depended more on fixed interests on loan system the Islamic banks used mostly Tawarruq, then Murabahah, and Bay al-Inah with high level of variations on reporting transparency. This study concludes that despite the structural difference in products provided by Islamic banks, a majority of them remain similar to traditional financing in practice, which should encourage greater Shariah-based innovation as well as greater consistency in reporting.