The global financial crisis, which started with failures
of large financial institutions in the United States,
has inevitably affected Thailand’s financial system. The
situation is said to be much worse than the 1997
In the wake of the crisis over a decade ago, a large
number of banks and financial institutions in Thailand
and all over the world were either closed down or
merged, yet the Islamic Bank of Malaysia and other
Islamic countries managed to stay afloat. Many
attributed their success to banking practices that were
in accordance with religious principles.
The Islamic Bank of Thailand was set up by the Islamic
Bank of Thailand Act B.E. 2545 (2002), as a state
enterprise under the Ministry of Finance, administered
by a board of governors, with an advisory council on
Islamic banking. The bank operates in accordance with
the rules of Sharia, or the Islamic rules on
The basic principle of Islamic banking is the sharing of
profit and loss and the prohibition of the payment of
fees for the renting of money, or businesses related to
profiteering, monopolizing, or vices. In an Islamic
hire-purchase transaction, instead of loaning the buyer
money to purchase the item, the bank buys the item from
the seller, and resells it to the buyer at a profit,
while allowing the buyer to pay the bank in
installments, while asking for strict collateral. The
bank customer thus pays a monthly fixed amount, making
his financial planning easier.
There are presently 26 branches of the Islamic Bank of
Thailand, scattered in all regions of the country. Pattani has two branches, one in the city, the Pattani
Branch, and Chabang Tiko Branch in Chabang Tiko
subdistrict, in Mueang district of Pattani, both making
a substantial profit each month.
The Islamic Bank of
Thailand (IBT) was established under a special act
by the country’s parliament in 2002, under the
supervision of the Ministry of Finance. The objective
was to provide Islamic banking services to all
customers, irrespective of their religion.
The idea of setting up an Islamic bank first germinated
in 1994 with the formation of a so-called ‘Growth
Triangle’ encompassing Thailand, Malaysia and Indonesia.
With the scheme, Thailand took on the responsibility of
developing its southernmost border provinces. The
designated areas selected had Muslim majorities and it
was felt there was a need to cater to them so an Islamic
bank should be set up.
To develop Islamic banking, commercial banks were also
brought on board and asked to provide Islamic products
alongside their conventional services. The Bangkok
Metropolitan Bank in 1997 started offering Islamic
financial services but ran into financial difficulties
and refunded customer deposits.
An Islamic banking law was drafted in 2002 allowing for
the IBT to be set up in 2003 starting with a head office
and a branch. This was followed by further branches,
making for a total of nine.
In 2005, an agreement was reached to transfer Shariah-complaint
funding from the Krung Thai Bank to IBT, which added an
other 18 branches to the network. IBT now offers deposit
and credit facilities and services like Mudaraba and
Wadia which are trust deposits with funds available from
ATMs, deposit books and cheques.