Where can you park your money? The Malaysian Muslim Money Dilemma

Your friend brags about earning up to ~6% with their conventional bank account, while your Islamic savings account pays a measly 0.25%. Your money sits there, technically "growing" but actually shrinking – thanks to inflation eating away at your purchasing power.

You're not alone. Millions of Malaysian Muslims face this frustrating choice every day: stick to your principles and watch your money lose value, or compromise your faith for better returns.

But what if we told you there's finally an option just for you? Read till the end.

The Dilemma That’s Costing You

The uncomfortable truth about most halal savings products in Malaysia is that they are wealth destroyers in disguise.

Take a typical Islamic savings account paying 1.5% annually. Sounds safe, right? But when average inflation in Malaysia runs around 2%, you're actually losing ~0.5% of your purchasing power every year. That RM50,000 you've been carefully saving? It’s buying about RM250 less goods each year, even though the number in your account stays the same.

Over 10 years, that's roughly RM2,000 in lost purchasing power – just for doing the right thing. It shouldn’t be that way.

It's enough to make anyone question their choices.

What Are Your Options Right Now?

Comparison of Savings & Investment Options (Malaysia September 2025)

Below is a comparison of common savings options – highlighting their expected returns, liquidity, Shariah compliance (per strict AAOIFI standards), insurance protection, requirements, and accessibility:

The "High-Interest" Bank Account

Banks love advertising 5–6% “high-yield” savings accounts, but read the fine print. To get those rates you often need to:

• Credit your salary with the bank every month
• Spend a minimum amount on their credit card
• Pay several bills through their platform
• Sometimes even purchase their insurance or investments

Miss any requirement? Your “6%” account drops to almost 0% (base rate ~0.05% p.a.). In other words, the banks are betting you won't keep up with all the conditions. And often they’re right – many people fail to meet one condition and end up earning near-zero interest despite the advertised headline rate.

(For example, one bank offers up to 6.85% if you deposit, pay, spend, and invest with them, but any month you don’t, your money might as well be under the mattress.)

Fixed Deposits

Islamic FDs (Fixed Deposit-i) currently offer around 2.8% – 3.5% annually, sometimes creeping up to ~3.9% during special promotions. They’re safe and predictable – you know what profit you’ll get.

The downside? Your money is locked away for months. You’ll barely beat inflation, and if you need your cash for an emergency or opportunity, you’ll typically lose the accrued profit by withdrawing early. It’s a trade-off between a slightly higher return and liquidity. And with rates still modest, the real growth after inflation is negligible.

(In other words, FD-i might preserve your wealth, but it won’t significantly grow it in real terms.)

Employee Provident Fund (EPF)

EPF consistently delivers around 5–6% dividends annually over the long run. The Simpanan Shariah option keeps it halal (EPF invests your savings only in Shariah-compliant assets), and the returns compound beautifully over decades. It’s government-backed and even guarantees a minimum 2.5% yearly dividend for conventional accounts (the Shariah fund has no guaranteed minimum, but has averaged ~5.4% since inception).

But here’s the catch: you can't touch it until you're 55 (with very limited exceptions for specific needs). It’s essentially locked until retirement. EPF is fantastic for long-term retirement planning and you should absolutely keep contributing – but it’s useless for short- or medium-term goals. You need someplace else to park money you might need before old age.

Amanah Saham Bumiputera (ASB)

ASB is a go-to investment for many eligible Bumiputera Malaysians, historically delivering around 5–6% yearly in dividends. It’s very low risk, with the government-linked fund (PNB) actively keeping the unit price fixed at RM1.00 and providing steady payouts. If you're eligible and haven’t hit the RM200k investment cap, it’s almost a no-brainer for building wealth safely.

However, ASB is only available to Bumiputera investors and that RM200k cap can become a ceiling for long-term investors. More importantly for the faith-conscious: while Malaysian fatwa authorities have deemed ASB investment permissible (harus), its portfolio isn’t 100% riba-free. By the Selangor mufti’s own admission, at least ~34% of ASB’s holdings are in non-Shariah-compliant assets (they passed the 66% halal threshold set by the Securities Commission). So for a Muslim who strictly wants to #WithdrawFromRiba, ASB might not provide the ethical certainty they seek.

In short: ASB offers great “essentially-guaranteed” returns and safety, but it’s limited to certain people and sits in a gray area of Shariah compliance (permissible by local fatwa, but not purely halal by international standards).

Money Market Funds

Money market funds pool your cash into short-term, high-quality financial instruments – think Islamic treasury notes, sukuk, Islamic bank deposits, etc. They generally offer annualized returns in the 2% – 4% range. The appeal is that they are relatively liquid and low-risk – many allow you to withdraw anytime without penalties, and you’ll earn profit for each day you stay invested.

But while several platforms market “Islamic” money market options, the reality is more complex. Many of these funds rely on Islamic versions of conventional tools (like commodity-based murabahah contracts for deposits, or Islamic repo arrangements). They technically follow Shariah guidelines, but often in a manner that some would argue mirrors interest-based finance. In other words, for truly ultra-conservative investors, even “Shariah-compliant” money markets may not provide 100% peace of mind.

Practical downsides? Management fees – typically around 0.2–0.5% – which eat into your returns (unlike a bank account). And unlike bank deposits, these funds are NOT protected by PIDM insurance. In practice they’re very safe, but if anything ever went wrong, there’s no RM250k guaranty – you bear the investment risk (however small it may be). Also, returns can fluctuate with market rates; you might get 3.5% this year and 3.0% next year, for example.

By now, it’s clear: each option involves trade-offs between returns, liquidity, risk, and faith adherence. So where does that leave us? Is compromising either returns or principles the only way?

An Alternative for You: Wahed’s Everyday Shariah Account (ESA)

Wahed’s new Everyday Shariah Account (ESA) provides something Malaysian Muslims have been waiting for, competitive returns without compromising faith.

Here’s what it offers:

• ~4.29% projected returns (USD): Finally a halal return that meaningfully beats inflation.
• 100% Shariah compliance: Funds are managed according to Islamic princiciples. That means no riba, no questionable instruments, no ethical grey areas. Every ringgit (or rather dollar) is put to work in a halal way.
• Quick withdrawal: Need your money? You can access funds within about 2 business days. It’s not instant like a savings account, but far better than a 3-month FD lock-in. It hits a sweet spot between earning a return and having access when necessary.
• CMC protection up to RM100K: The ESA is under a framework that provides Capital Market Compensation Fund (CMC) protection up to RM100,000 per eligible investor, subject to terms and conditions. In plain English: there’s a regulatory safety net (similar to how bank deposits have PIDM). You get peace of mind that even in a worst-case scenario of the platform’s failure, your money is covered.
• No conditions or fees – There are no hoops to jump through to “unlock” the advertised rate. No mandatory salary credit, spending, or bill payments. And no management fees whatsoever on this account. Every bit of profit goes to you.

In essence, ESA is aiming to deliver a “high-yield savings” experience that is fully halal. It’s not a speculative investment or a long-term pension fund – it’s designed for your everyday cash that you want to keep halal and productive.

How Does ESA Really Stack Up?

Against High-Interest Bank Accounts

‍ESA aims to give you ~4.29% without the song-and-dance routine. No monthly conditions to remember. No risk of your rate plummeting to 0.05% because you forgot to pay one bill through the account. It’s straightforward – you deposit, you earn, done. The simplicity here cannot be overstated.

Against Fixed Deposits

‍Similar or better returns (4.29% is actually higher than most current 12-month Islamic FD rates), and you aren’t locked in. You don’t have to choose between earning a return and maintaining liquidity – ESA lets you have both. Need your money next week? No problem, you won’t lose what you’ve earned so far. It’s like having the profit of an FD with the flexibility of a savings account.

Against Money Market Funds

‍Higher expected returns (4.29% vs around 3.4–3.6% for many Islamic money market funds) with better protection. ESA’s funds are protected by CMC and covered by a compensation scheme up to RM100K, whereas typical money market unit trusts have no such guarantee.

Against ASB

‍Competitive returns without the handcuffs. There’s no eligibility restriction – anyone can open an ESA, not just Bumiputera. There’s no RM200k cap limiting how much you can benefit. And for those concerned about ASB’s mixed Shariah status, ESA is a welcome relief: it’s fully riba-free by design, so you don’t have to rely on permissibility loopholes or fatwa exceptions.

Against EPF‍

Apples and oranges, really. EPF is fantastic for retirement – it has unbeatable tax advantages and might yield higher over decades – but you simply can’t use EPF as a place for short-term savings. ESA is for your cash-on-hand needs. Think of it as a complement to EPF: use ESA for now-to-5-years money, and EPF for the 20+ year money. (Not to mention, EPF’s dividend isn’t guaranteed halal unless you opted into Simpanan Shariah – whereas ESA’s returns are by definition halal.)

Where Does ESA Fit in Your Life?

ESA isn’t meant to replace every other savings product – it’s meant to fill the gaps that currently force us into unsatisfactory choices. Some examples:

Your Emergency Fund

Most advisors say to keep ~6 months of expenses in cash for emergencies. If you’re doing that the halal way, it’s probably sitting in a bank account earning virtually nothing (0.25% if you’re lucky). With ESA, that emergency stash could earn 4.29% while still being there for you at a moment’s notice. Over years, that’s a big difference – your rainy-day fund grows instead of getting eroded by inflation.

Short-term Goals

‍Planning to buy a car in 2 years? Saving up for marriage or umrah? These are goals too short-term to invest in stocks or property (too risky), so people often settle for FDs or just leave cash idle. ESA gives you a better option: you can aim for ~5% returns without locking your money up for long periods. If an opportunity or need arises, you can pull funds out in a couple of days without penalty.‍

Excess Cash Parking

‍Maybe you’ve sold an asset or received a bonus and you’re not sure where to invest it yet. Rather than parking it in a conventional account (and feeling guilty or getting tempted by riba) or letting it sit in a no-yield Islamic account, park it in ESA. It’ll earn a competitive profit rate while you take your time to decide on longer-term investments.

The Halal Bridge

‍For Muslims who are in the process of transitioning their finances to be more Shariah-compliant, ESA can act as a bridge. Suppose you’ve decided to withdraw from riba-based instruments – you sold off some conventional investments or closed an interest-bearing account. You might not yet have a specific halal investment in mind for that money. Put it in ESA for now – it keeps your money fully halal and working for you until you’re ready to deploy it elsewhere. No pressure, no rush.

In all these scenarios, the key role of ESA is to fill the void between zero-return “safe” accounts and higher-return-but-inaccessible accounts. It gives Muslims a way to earn decent returns on liquid savings, where previously the choices were poor (at least for the fully Shariah-compliant options).

The Bottom Line

For too long, Malaysian Muslims have been told they can’t have their cake and eat it too – that choosing halal means accepting mediocre returns. We’ve watched conventional products dazzle with 5–6% interest (at the cost of riba and tricky conditions), while Shariah-compliant savings accounts let inflation silently steal our wealth.

ESA challenges that assumption. It’s not a magic bullet that outperforms every product in every aspect, and it’s not meant for long-term investing like EPF or property. But it finally offers a genuine alternative for Muslims who refuse to choose between their faith and their financial well-being. It proves that you can earn a respectable return and stay true to your principles.

The question isn’t “Is ESA better than every other product out there?” – the question is “Is it better than what I’m currently using for my day-to-day and short-term savings?” For most Muslims currently earning near 0% on their cash while praying inflation doesn’t hit them too hard, the answer is a resounding yes.

Your faith shouldn’t cost you your financial future. And finally, it doesn’t have to.

Want to learn more about ESA? Check out Wahed’s documentation on how they achieve Shariah compliance and all the nitty-gritty details (profit calculations, withdrawal process, etc.). Always do your due diligence to ensure it fits your needs.

Disclaimer:  Wahed ESA projected return of 4.29% p.a. (USD) is based on estimates as of 30 October 2025, net of fees, and is not guaranteed. Projected returns are not guaranteed. Past performance doesn’t indicate future results. Please consult with qualified financial advisors for personalized advice.

This page is provided for informational purposes only and does not constitute investment advice or a recommendation to invest. This content has not been reviewed by the Securities Commission Malaysia. For more details please visit www.wahed.com/my/legal

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