Assignment BOP (GROUP AMMAR) 1

KOLEJ PROFESIONAL MARA BANDAR MELAKA

BANKING OPERATIONS AND PRACTICES
MGT 3663

Prepared by:

NAME ID NUMBER CLASS
Muhammad Ammar Fitri Bin BMF19-06-051 DBF 6B
Zainal Abidin
Nur Syazwani Azia Binti Shahidan BMF19-06-038 DBF 6B
Ayu Nabilah Binti Khushairi BMF19-06-025 DBF 6B
Nur Fariza Binti Azni BMF19-06-021 DBF 6B
Nurafiqah Binti Yusri BMF19-06-038 DBF 6B
Syaza Rusydina Binti Muhammad BMF19-06-019 DBF 6B
Rusydan

Prepared for:
PN. NOOR AISYAH BINTI OTHMAN

Submission Date:
26 April 2021

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TABLE OF CONTENT PAGES
3
BIL. SUBJECT 4
1. Acknowledgement 5
2. Introduction of the Assignment
3. Table for the Differences of Uses of Funds 6-7
4. Explanation for the Differences of Uses of Funds 8-9
5. Table for the Differences of Sources of Funds 10 - 11
5. Explanation for the Differences of Sources of Funds 12
7. References

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ACKNOWLEGMENT

First and foremost, we are feeling thankful to Allah SWT for granting us the chances,
guidance and good health in effort to completing this group assignment. We are also feeling
grateful because we can complete this assignment within the given period. We would also like to
thank to our beloved lecturer, Madam Noor Aisyah Binti Othman our Banking Operation and
Practices (MGT3663) subject lecturer, for the valuable guidance and advice. She inspired us
greatly to work in this assignment.

Besides, the success and outcome of this assignment required a lot of guidance and
assistance from many people and we extremely fortunate to have got this all along the completion
of our assignment work. Whatever we have done is only due to such guidance and assistance
and we would not forget to thank them.

We respect and thank Madam Noor Aisyah for giving we us an opportunity to do this
assignment work and providing us all support and guidance which made us complete the
assignment on time, we extremely grateful to her for providing such a nice support and guidance.

Finally, an honorable mention goes to all friends in the group for their understandings and
supports in completing this project. This assignment cannot be completed without the effort and
co-operation from our group members. Without workgroup of that mentioned above and guidance
by our lecturer, we would face many difficulties while doing this project.

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INTRODUCTION
Islamic banks are Islamic banking organizations that work on collecting funds and
investing them according to the guidelines of the Islamic Shari‘ah (revealed laws) in a way that
can serve the society of the Islamic solidarity, achieve the justice of distribution and put funds in
the sound Islamic track. Furthermore, Islamic banks do not lend money in order to make profit.
Instead, they use funds for equity investments, investment financing, consumer financing, and
so on.

Islamic banks aim from investing funds to build the Muslim individual and society and thus
their responsibility becomes a great importance in the society. Besides, interaction and conformity
between them and society become of considerable necessity. This is because, resources of the
Islamic bank are the first starting point towards forming a policy of investing them. Therefore,
these resources should be studied well whether they are present or expected so that the
compatibility of these resources with the different forms of investment can be defined and
determined.

Islamic priorities seeking to achieve favorable Islamic revenue rates, this put on its
shoulder the responsibility of caring of the nature of their financial resources and acting on making
a stable growth of them so that they may be able to carry out the plans of investment that can
attain the desired aims. Furthermore, Islamic banking is more desirable than conventional
banking, it is because it led to higher level of customer satisfaction and better service quality.
Thus, bank as a banking institution conducting all known banking activities including borrowing
and lending without interest. Not to mention, it is an evident that Islamic banks are more focused
towards just and equitable distribution of resources as compared to conventional banks.

Moreover, in this assignment, we analyzed the comparison on banking operation between
conventional and Islamic banks based on deep research on sources of funds in chapter 3 and
uses of funds in Chapter 4. Besides, all the specific items which represents the differences
between Islamic banks and conventional banks are highlighted. For the purpose of this study, we
have chosen Bank Muamalat bank to represent Islamic bank and Hong Leong Bank to represent
the conventional bank. Lastly, all the informations are for the latest year and available online on
the respective companies’ website.

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TABLE FOR THE DIFFERENCES OF USES OF FUNDS

USES OF FUNDS (WORKING CAPITAL) Difference Revolving Credit
(Hong Leong Bank)
Murabaha Working
Capital Financing Loan contract
(Bank Muamalat)
Loan RM 50,000 to RM
Murabahah Cost plus Profit Contract 400,000
contract Financing/loan Customer as Debtor

Min RM5,000 Variable Interest rate from
the payment
Bank appoint customer as Role of customers Short Term
Wakil (Agent) to purchase on Type of Income Fixed Deferred Payment
its behalf Exist

Profit from the Murabahah

Short Term or Long Term Period of Financing
Lump Sum Deferred Payment Type of Payment
None Credit Limit

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Differences in Uses of Funds between Hong Leong Bank and Bank Muamalat
Malaysia Berhad

Islamic banks used the funds to raise revenue by providing financing options. The Islamic
bank Shariah Council / Committee has approved the financing facilities based on Islamic
principles. The following are the principles that are commonly used by Islamic banks such as
Murabahah (cost plus profit), Bai’ Muajjal (deferred payment), Bai’ As-Salam (prepaid purchases),
Ijarah (leasing) and Qard al-Hassan (benevolent loans). The conventional bank uses its fund in
loans, revolving credit, overdraft and investment.

So, our group chose the Murabahah working capital financing (MWCF-i) for Islamic Bank
and revolving credit for the conventional bank. After thoroughly researched both bank’s uses of
funds, we can find differences between them. MWCF-i is a facility provided by BMMB to its clients
(buyers) to help them fund the purchase of trading products such as raw materials and semi-
finished goods (cost-plus-profit). Murabahah is a selling contract that has a profit margin. It is a
service that allows consumers to finance their short-term working capital needs through a lump-
sum deferred payment cost plus benefit arrangement. Revolving credit is a type of credit that
allows an account holder to borrow money indefinitely up to a certain dollar limit while repaying
a portion of the current balance due in monthly installments. Each payment replenishes the
account holder's available funds, minus the interest and fees paid.

Firstly, in Murabahah working capital, the use of contract is Murabahah when the bank
sells the goods back to the customer plus mark up while revolving credit uses loan contract. These
occur when the customer applied for the revolving credit. However, when the customers repaid
their loan, the customer can borrow again to the credit limit without going through another loan
approval process.

Furthermore, the minimum limit for Bank Muamalat to finance their customers is RM5,
000. In most cases, revolving credit is allowed with no expiration date. As long as the account is
in good standing, the bank will allow the relationship to continue. The bank can increase the
credit limit overtime to encourage its most loyal customers to spend more.

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Moreover, the role of customers in Murabahah working capital is as Wakil (agent)
to purchase the goods on the bank's behalf. At the same time, the bank will settle the payment
to the supplier on a cash basis. Then, the customers need to pay to the bank with lump sum
deferred payment on the maturity date. Users applying for revolving credit are considered as a
debtor and they have the obligations to settle the debt on deferred payment plus interest monthly.

Lastly, Bank Muamalat will gain profit as their income from the financing as the
users will pay them with cost price plus mark up. Murabahah working capital financing tenor is
30 days minimum which can be short-term or long-term financing. Revolving credit charges
interest every month and it is their source of income on a short-term period.

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TABLE FOR THE DIFFERENCES OF SOURCES OF FUNDS

SOURCES OF FUND (CURRENT DEPOSIT)

Current Account-i Difference Current Account
Minimum deposit amount
(Bank Muamalat) (Hong Leong Bank)
Eligibility
Min. RM1000 Min. RM500

• Individual, Clubs, • 18 years and above.

Societies, Trustees, • Applicable to societies,

Institutions, small business (sole

Associations & proprietors,

Business Entities etc; partnerships), clubs,

• Malaysians and associations and

permanent residents schools.

reside in Malaysia;

• All individuals above

18 years old;

• Join account are

allowed.

➢ Minimum Deposit ➢ Low Initial Deposit-
Open your account
RM1,000.00 with just RM500

(Individual) / ➢ Cheque book will be
provided.
RM2,000.00 (Non-

Individual);

➢ Cheque Book (upon Features

request);

➢ Debit Card-i (on

application);

➢ Monthly Card-i (on

application);

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❖ Full Debit Card ❖ Monthly E-Statement-

functions; Keep track of your

❖ Full access to i- finances.

Muamalat Mobile ❖ Easy Access-

apps; Nationwide branches,

❖ Full access to i- ATM, Phone Banking

Muamalat Internet and Hong Leong

Banking; Connect.

❖ Existing customers are Benefits
Protection
now able to open a

new account via i-

Muamalat (no joint

account allowed);

❖ Full access to i-Biz

Internet Banking (for

non-individual

customer);

❖ May apply for other

banking facilities e.g.

Corporate Terminal

Services/e-Pos

Terminal (for non-

individual customers);

❖ Automatic fund

transfer for collection

accounts.

Protected by PIDM up to Protected by PIDM up to
RM250,000 for each RM250,000 for each
depositor depositor

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Differences in Sources of Funds between Hong Leong and Bank Muamalat Malaysia
Berhad

Companies such as bank always seek sources of funding to grow the business. Funding also
call financing, represent an act of contributing resources to finance a program, or a need. In
Islamic Banking operation financing to customers are source from deposit funds and investment
funds. The deposit funds is for saving or safekeeping and guarantees. The investment funds is to
be invested without guarantee of any profit. Type of account in deposit fund is Current Deposit,
Saving Deposit and Term Deposit.

In source of fund our group decided to choose Current Deposit. All Islamic banks operate
current account for their customers as tradisional banks. This account govern what is known as
demand deposit. The bank guarantee full return of this deposit on demand. The bank may use
this fund in its business operations at it owns risk. Since all risk is borne by bank, the depositor
are not entitled to any share in profit earn by the bank. There are some of the different regarding
to current deposit in Islamic bank and conventional bank.

First and foremost, both of the bank has different minimum of deposit amount. In Bank
Muamalat the amount that has been stated is RM 1000 while in Hong Leong Bank is amounted
RM 500 less than Bank Muamalat. Next is in term of eligibility, the qualification in Bank Muamalat
is for individuals, Clubs, Societies, Trustee, Association and Business Entities. Other than that, it
available for all individual above 18 years old and also a Malaysian, permanent residents reside
in Malaysia. However, for Hong Leong Bank it available only to 18 years old and above. In Hong
Leong Bank it applicable for Societies, Small business such as sole priporities and partnership,
Clubs, Association and school.

Moreover, the features for both banks that have been chosen, for Bank Muamalat provides
two types of the current account, which is for individual and non-individual with a minimum
deposit of RM 1,000 and RM2,000 respectively. However, Hong Leong Bank provides a current
account for individuals only with a minimum deposit of RM 500 only. Both of the banks are
providing cheque book for their customers. Also, Bank Muamalat gives debit card-i and monthly
card-i for their customers.

Other than that, the benefits for the customer that opens the current account from both
banks are different too. Bank Muamalat provides full debit card functions for the convenience of

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its customers. This Islamic bank provides an online platform named i-Muamalat that can be
accessed easily by customers. Customers can access this application for internet banking and
may open a new account via i-Muamalat. Using i-Muamalat customers able to access to i-Biz
internet banking and may apply for other banking facilities like Corporate Terminal Services/e-
Pos Terminal. Bank Muamalat customers will enjoy automatic fund transfers for collection
accounts. Nonetheless, Hong Leong bank provides benefits to their customer such as Monthly E-
Statement for customers to keep track of their finances. The advantage for the customer of Hong
Leong Bank is easy to access their account by nationwide branches, ATM, Phone Banking and
Hong Leong Connect.

The only similarity between both current accounts in these banks is, they are protected by
Perbadanan Insurans Deposit Malaysia (PIDM) up to RM 250,000 for each depositor. PIDM
secures your bank savings as well as your takaful and protections benefits within the occasion of
a part bank or an insurer member coming up short. So, within the improbable occasion of a part
bank failure, your stores will be repaid instantly.

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REFERENCES

Bibliography

Business & Corporate Banking. (n.d.). Retrieved April 12, 2021, from HongLeong Bank :
https://www.hlb.com.my/en/business-banking/business-and-corporate-banking/lending-and-
financing.html

Current account. (n.d.). Retrieved April 14, 2021, from HongLeong Bank:
https://www.hlb.com.my/en/personal-banking/deposits/current-account/current-account.html

Current account-i. (n.d.). Retrieved April 14, 2021, from Bank Muamalat:
https://www.muamalat.com.my/consumer-banking/deposit/current-account-i/

Murabahah Working Capital Financing-i (MWCF-i). (n.d.). Retrieved April 12, 2021, from Bank
Muamalat: https://www.muamalat.com.my/business-banking/trade-finance/trade-finance-
product-services/trade-finance-product-services-mwcf/

PIDM protection is free. (2019, May 28). Retrieved April 23, 2021, from PIDM :
https://www.pidm.gov.my/en/media/press-release/2018-1-1/pidm-protection-is-free/

Sources & Application of Funds. (2020, June 19). Retrieved from Islamic Bankers Resource Centre:
https://islamicbankers.me/focus/sources-application-of-funds/

Sources of Funds of Islamic Banks. (2018, July 25). Retrieved from IslamicMarkets:
https://islamicmarkets.com/education/sources-of-funds-of-islamic-banks

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