After many years of strong growth performance, Islamic banking industry has become an important source of the global financial system. As one of the pioneer countries, Malaysia has been trying to improve its Islamic financial system since 1980's by diversifying Islamic financial products. In order to have a sustainable development in Islamic finance in Malaysia, Shariah compliant new Islamic financial instruments are produced. Today, as one of the leader countries in Islamic finance Malaysia has a significant share in the Islamic financial system with its Islamic banks' assets, sukuk and other Islamic funds. By comparison in terms of Islamic financial assets, Malaysia comes just after Saudi Arabia. The emergence of the Islamic banking system in Malaysia was driven by the demand of depositors for interest free services.