Legislative Development Model on Credit of Islamic Principle: Case of Islamic Bank of Thailand

Abstract

             The objectives of this thesis are to (1) study the concepts, theories and legal principles of loans for financial institutions (2) study the concepts, theories and principles of Islamic finance related to loan approvals (3) Study the laws related to lending business of the Islamic Bank of Thailand and foreign laws, for Malaysia, Singapore, and the United Kingdom (4) to study lending problems under Islamic principles for The Islamic Bank of Thailand and (5) provide approaches for amendments to the laws for The Islamic Bank of Thailand.

             This is a qualitative legal research based on laws regarding The Islamic Bank; other related laws, regulations, and procedures; and journal articles and research papers in both in Thailand and other countries; and foreign laws. The researcher synthesized and analyzed qualitative data from the content obtained from research papers and literature reviews to develop the recommended approach for improvements to the Islamic Bank of Thailand Act B.E. 2545.

              The results of the study have found that (1) according to the concept of credit theory used by financial institutions, which was clearly stipulated in the Financial Institution Business Act B.E. 2551, the granting of loans by lending money or transactions should earn interest in return.  That is not in line with Islamic finance principles that prohibit interest-bound loans. (2) Providing credit under Islamic finance principles is stipulated in the Islamic Banking of Thailand Act B.E. 2545 by the advice of the Advisory Board (Religious). (3) In promoting the Islamic finance industry abroad, in countries such as Malaysia, Singapore and the United Kingdom; the internal financial system has been developed through the development of structures and laws to support the Islamic financial system to be equal to that of other commercial banks. However, Thailand has not yet developed such a law to support Islamic finance. (4) Lending under Islamic finance principles is more complex and cumbersome, causing more burden of taxes, duties and fees than general commercial bank lending. (5) With regards to The Islamic Bank of Thailand Act B.E. B.E. 2545, the definitions and guidelines for the relief and exemption of tax burden and transaction fees should be modified to be close or equal to that of other commercial banks.