Comparing the Performance Standards of Islamic Financial Institutions of Thailand and Malaysia

Abstract

Financial institutions are important to the economy. They are one of the actors to promote the Thai economy.With the advent of ASEAN, combined population of the region will be around 600 million, more than half are Muslims. These Muslims represent considerable market potential for financial institutions.However, financial products offered to them must be aligned with their Muslim doctrine. Essentially, the key principleforbids the tampering with interest. This principle is different from standard practices of financial institutions in general.Thus was born the Islamic financial institutions to support this particular group. Therefore, it can be argued that the Islamic financial institutions have a promising market potential in ASEAN. The success of Islamic financial institutions in Malaysia is often cited as the success story of such institutions. These are lessons to be learned from such success. Thailand, in contrast, has only one Islamic financial institution- the Islamic Bank of Thailand. When compared with the like institutions in Malaysia, there are still many issues that the Islamic Bank of Thailandhas to address in order to bring itself at par with the Malaysian counterparts. This article aims to address this gap by comparing the regulatory infrastructure that supports the implementation of Islamic banking principles to the appropriate Islamic standards. This article also highlights the importance of good operating standards recognized internationally.