Malaysia's first-ever Islamic bank said it had received central bank approval for Dubai Investment Group to begin due diligence on its plan to purchase up to a 49 percent stake in the bank.

Bank Negara Malaysia has approved the move for Dubai Investment Group LLC (DIG), Bank Islam said in a statement to the Bernama news agency.

It said that a partnership with DIG would significantly improve its performance in the long run and fuel the bank's emergence as a leading global financial institution.

DIG is the global financial investment arm of Dubai Holding LLC, which operates in more than 20 companies in sectors including hospitality, tourism, real estate, technology, finance and energy.

Bank Islam, which was established in 1983, posted net profits of RM85.74 million in 2004 but dived into the red in its latest results which showed a RM480 million net loss.

BIMB Holdings, which controls Bank Islam Malaysia, said the loss was mainly due to a provision of RM774 million, mostly to cover non-performing loans from its branch in Labuan, Malaysia's offshore financial hub.

Malaysia is a leader in Islamic banking after introducing the service in 1983 which provides products and services that comply with syariah or Muslim religious laws banning the earning of interest.