Three-tier banking model proposed for Islamic banking in Malaysia

Three-tier banking model proposed for Islamic banking in Malaysia

three steps

A three-tier banking system is needed in Islamic banking to further strengthen the industry, an economist suggested.

"The first tier is to be like the conventional bank, where people put their money in the bank, and where the bank gives money to meet their type of transactions.

"The second tier is like a Mudarabah type of institution or Mudarabah company, where people put their money and combine it and try and develop different things. This model is very much applicable for SME financing, where a person has the idea but does not have the money, (while) and another person has the capital. They can combine using the Islamic principle.

"The third tier is like the venture capital or Musyarakah, where big infrastructure projects financing (is involved)," Professor Dr. M. Kabir Hassan of New Orleans University said.

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