In Malaysia, Toyota is quickly expanding its presence in the auto market. But when expanding through different regions and cultures, there’s often a snag. And one of those snags in Malaysia involves Islamic law and culture. But here’s how Toyota solved it.
According to a Toyota spokesperson, the automaker received permission to issue up to $312 million in Islamic bonds. But with bonds comes interest. Under Islamic law, interest is prohibited. So instead of interest, people who buy these bonds in the region will receive a dividend instead of interest from their bonds.
This has two distinct advantages for the people of Malaysia. For one, the new system reduces the people’s dependence on the banking system. But what’s even better than that is the fact that it will make it easier for the people in the area to take out a loan with any Toyota dealer in the region while maintaining their religious beliefs.
This is a great move for Toyota, too. Since these loans and leases account for 15 percent of the automaker’s total revenue throughout the region, officials want to protect its presence and reputation there. And with the openness toward Islamic financial rules and regulations, Toyota could expand its business by about 20 percent over the next couple years.
With this move, Toyota is also an example to other automakers. More companies are planning on moving into the area of Islamic finance to meet the growing needs of a global market in which cultures differ.
