Introduction

Islamic finance in Thailand has been expanding since the establishment of the first Islamic Financial Institution (IFI), Pattani Islamic Saving Cooperative Limited, in 1987. This led to the establishment of an Islamic bank, Islamic sections in commercial banks, more than thirty Islamic cooperatives, Islamic asset management firms, Islamic insurance (takaful) companies, and informal social financial institutions. The literature on Islamic finance in Thailand has duly discussed the basic features of Islamic finance such as shariah-compliant contracts, service quality, acceptance of IFIs, and the use of Islamic finance among Muslim clients. Only recently have issues related to the performance and impact of Islamic finance on clients’ households been discussed.

Until now, scholars are at odds as to whether Islamic finance improves the lives of the Thai population (Muslims and non-Muslims) and adapts to a new set of banking rules and regulations. This chapter examines the impact of Islamic finance on a multicultural society such as Thailand. More specifically, it aims at identifying the forces behind the emergence of the Islamic finance industry, evaluating the current state of the industry, and scrutinizing Islamic finance's impact on society. How does Islamic finance operate in a non-Muslim country? Has there been a complete development plan that ensures that the Islamic finance industry benefits clients of different religious groups? It argues that the Thai government can address the gap of financial exclusion and at the same time ensure better coexistence of various religious groups in the country.

Muslims in Thailand and Their Socioeconomic Status

Thailand is a predominantly Buddhist country where religion shapes the country's political culture and people's worldview (Yusuf 2009). Muslims represent the largest religious minority group and can be found nationwide. The majority of Muslims live in the four southernmost provinces of Pattani, Yala, Narathiwat and Satun, and in general, they are found to be poor, undereducated and unemployed (Tawat 2013). The current southern conflict, which began in 2004, has worsened their socio-economic conditions; they rely on agriculture and unskilled low-paying jobs.

Scholars have proposed various theories about Islam's introduction to Thailand. One fact is that in 128 A.D.—several centuries before the founding of the Kingdom of Sukhothai—Arab and Persian Muslims were found active in the ports of the Tenasserim and the Isthmus of Kra, the first truly Thai kingdom (Forbes 1982).