To enable Islamic banks to hold liquid papers to meet the statutory liquidity requirements, the Malaysian Parliament passed the Government Investment Act 1983 (now known as the Government Funding Act 1983) to enable the Government of Malaysia to issue non-interest bearing certificate known as Government Investment Certificates (GIC), under the concept of Qardhul Hasan.
The concept of Qardhul Hasan, however, did not qualify the GIC (now known as the GII-i) as tradable instruments in the secondary market.
On 15 June 2001, the Government of Malaysia, with the advice of BNM, issued a 3 -year GII-i of RM2.0 billion under the principle of Bai’ inah, which allowed the GII-i to be traded in the secondary market via the concept of Bai’ ad-Dayn (debt trading).
In the primary issue, the submission of tender will be on price/100 basis and is conducted through the Islamic banks and Principal Dealers with Islamic operations.
On 16 March 2005, the Government of Malaysia, with the advice of BNM, issued the first Profit-Based GII-i 5-year tenure of RM2 billion.
The profit-based GII-i is issued at par via the principle of bai' bithaman ajil, and is coupon-bearing, and payable semi-annually.