A Malaysian firm and Saudi Arabia’s Al Rajhi Bank have created the
world’s first electronic funds transfer system to comply with Islamic
financial principles, company officials said Thursday.
Al Rajhi and e-Kencana, a Malaysian electronic service provider, said
they had collaborated on the system, known as the Islamic Payment Switch
(IPS), which will be ready by July.
Al Rajhi said its first application would see the issuing of a prepaid
or debit card to enable customers to transfer funds between Malaysia and
Al Rajhi Malaysia’s chief executive, Ahmed Rehman, said the bank will
initially target some 100,000 Malaysians who travel to Mecca every year
to perform the holy pilgrimage.
“This facility will begin from Malaysia to serve the rest of the Muslim
nations that have pilgrims traveling to Mecca and Medina,” Rehman said
at the signing agreement between the two companies.
“The IPS will be fully compliant to the highest sharia standards,” he said.
Islamic finance fuses principles of sharia, or Islamic law, and modern
According to sharia, the earning of interest is banned and there should
not be links to companies associated with tobacco, alcohol or gambling
considered taboo by Muslims.
Under the system, a pilgrim will be able to buy a prepaid card for a set
amount of money from Al Rajhi in Malaysia, and it can then be used to
withdraw funds from any of its 400 branches or 1,600 teller machines in
Al Rajhi, the world’s largest Islamic banking group, first set up
operations in Malaysia in 2005, where it has 12 branches and 47 teller
Rehman said migrant workers could also use the system to transfer funds
from Saudi Arabia to Malaysia.
The system will be expanded to include other Islamic banks and to cover
other Muslim countries, Rehmad said, adding that the payment interchange
will have its hub in Malaysia.