Measuring Good Governance for Islamic Financial Institutions for Achieving Islamic Social Finance Objectives: The Need for Shariah Governance Index

2022 ◽  
pp. 91-102
Author(s):  
Nor Asila Binti Nazmi ◽  
Rusni Hassan ◽  
Abdul Rahim Abdul Rahman
Keyword(s):  
Financial Institutions ◽  
Good Governance ◽  
Governance Index ◽  
Islamic Financial Institutions ◽  
Shariah Governance

scholarly journals Towards New Sharia Governance for Islamic Financial Institutions

2021 ◽  
Vol 18 (1) ◽  
pp. 39-58
Author(s):  
Abdulazeem Abozaid
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Financial Institution ◽  
Islamic Banking ◽  
Banking And Finance ◽  
Finance Industry ◽  
Regulatory Authorities ◽  
Governance Model ◽  
Islamic Financial Institutions ◽  
Shariah Governance

Since its inception a few decades ago, the industry of Islamic banking and finance has been regulating itself in terms of Sharia governance. Although some regulatory authorities from within the industry, such as Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB), the Islamic banking and finance industry remains to a great extent self-regulated. This is because none of the resolutions or the regulatory authorities' standards are binding on the Islamic financial institution except when the institution itself willingly chooses to bind itself by them. Few countries have enforced some Sharia-governance-related regulations on their Islamic banks. However, in most cases, these regulations do not go beyond the requirement to formulate some Sharia controlling bodies, which are practically left to the same operating banks. Furthermore, some of the few existing regulatory authorities' standards and resolutions are conflicted with other resolutions issued by Fiqh academies. The paper addresses those issues by highlighting the shortcomings and then proposing the necessary reforms to help reach effective Shariah governance that would protect the industry from within and help it achieve its goals. The paper concludes by proposing a Shariah governance model that should overcome the challenges addressed in the study.Pada awal berdiri, Lembaga Keuangan Syariah merupakan lembaga keuangan yang menerapkan Hukum Syariah secara mandiri dalam sistem operasionalnya. Ia tidak tunduk pada peraturan lembaga keuangan konvensional, sehingga dapat terus berkomiten dalam menerapkan Hukum Syariah secara benar. Selanjutnya, muncullah beberapa otoritas peraturan yang berasal dari pengembangan Lembaga Keuangan Syariah. Diantaranya adalah Islamic Financial Services Board (IFSB) dan Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Hal ini tidak menyimpang dari kerangka peraturan Hukum Syariah, sebab standar peraturan dan keputusan yang dikeluarkan ditujukan khusus untuk Lembaga Keuangan Syariah saja. Beberapa Negara telah menerapkan peraturan tata kelola Hukum Syariah pada Bank Syariah mereka. Namun dalam banyak kasus, peraturan yang diterapkan tidak mampu mengontrol Lembaga Keuangan Syariah tersebut secara penuh. Sehingga, secara praktis proses pengawasan diserahkan kepada lembaga keuangan yang beroperasi. Akan tetapi, beberapa standar dan keputusan yang dikeluarkan oleh sebagian pemangku kebijakan bertentangan dengan keputusan yang dikeluarkan oleh beberapa akademi Fiqh. Artikel ini ditulis untuk menyoroti permasalahan yang timbul pada tata kelola Lembaga Keuangan Syariah, khususnya kekurangan yang tampak pada sistem tata kelola. Kemudian, penulis akan mengajukan usulan tentang efektifitas tata kelola Lembaga Keuangan Syariah yang bebas dari permasalahan.

scholarly journals Duties and Decision-Making Guidelines for Sharī‘ah Committee: An Overview of BNM (Tugas-Tugas dan Garis Panduan Dalam Membuat Keputusan Bagi Jawatankuasa Shariah: Satu Gambaran Umum BNM)

2019 ◽  
Vol 16 (3) ◽  
pp. 300-318
Author(s):  
Muhammad Amanullah ◽  
Muhammad Nabil Fikri Bin Mhd Zain
Keyword(s):  
Decision Making ◽  
Financial Institutions ◽  
Basic Principle ◽  
Research Paper ◽  
Islamic Finance ◽  
Related Literature ◽  
Governance Framework ◽  
Islamic Financial Institutions ◽  
Shariah Governance ◽  
Critical Methods

Shari`ah committee of every Islamic bank or other Islamic financial institutions has some specific duties. Likewise, this committee should follow some guidelines in making its decisions. Bank Nigara Malaysia (BNM) has prescribed these duties and decision-making guidelines in its Sharī‘ah Governance Framework (SGF). Using analytical and critical methods, this research paper aims to study these duties and decision-making guidelines. The duties of the Sharī‘ah  Committee set by BNM include the basic principle of advising, endorsing, supervising, assisting, consulting and reporting on Sharī‘ah  matters. Besides that, the decision-making guidelines for Sharī‘ah  Committee by BNM are well-structured and practical. This study contributes to the related literature by showing that the country’s support towards the Islamic finance sector, through BNM’s guidelines, may help the development of IFIs in the country.  The results drawn from this study may help policymakers to develop better duties and decision-making guidelines for Sharī‘ah Committees. This study is limited to the SGF issued by BNM in 2010 only. Keywords: Sharī‘ah Committee, Duties, Decision-making, Guidelines. Abstrak Jawatankuasa Shariah bagi setiap bank Islam atau institusi kewangan Islam (IFIs) mempunyai beberapa tugas tertentu. Begitu juga, jawatankuasa ini perlu mengikuti beberapa garis panduan dalam membuat keputusannya. Bank Negara Malaysia (BNM) telah menetapkan tugas-tugas ini dan juga garis panduan membuat keputusan dalam Shariah Governance Framework (SGF). Dengan menggunakan kaedah analitikal dan kritikal, penyelidikan ini bertujuan mengkaji tugas-tugas serta garis panduan membuat keputusan tersebut. Tugas-tugas jawatankuasa Shariah yang ditetapkan oleh BNM merangkumi prinsip asas dalam menasihati, menyokong, menyelia, membantu, berunding dan melaporkan berkenaan isu-isu Shariah. Di samping itu, garis panduan membuat keputusan ke atas jawatankuasa Shariah yang ditetapkan oleh BNM adalah amat berstruktur dan praktikal. Kajian ini menunjukkan bahawa sokongan yang diberikan oleh negara terhadap sektor kewangan Islam melalui garis panduan ini boleh membantu kepesatan IFIs dalam negara Malaysia. Keputusan yang diperoleh daripada kajian ini dapat membantu penggubal dasar untuk membangun dengan lebih baik tugas-tugas serta garis panduan membuat keputusan untuk Jawatankuasa Shariah. Kajian ini terhad kepada SGF yang dikeluarkan oleh BNM pada tahun 2010 sahaja. Kata Kunci: Jawatankuasa Shariah, Tugas-Tugas, Membuat Keputusan, Garis Panduan.

scholarly journals Malaysian’s Government Linked Investment Companies: Is There a Need for Shariah Governance Framework? (Syarikat Pelaburan Berkaitan Kerajaan Malaysia: Adalah Adakah Perlu Rangka Kerja Tadbir Urus Syariah?)

2020 ◽  
Vol 17 (2) ◽  
pp. 198-222
Author(s):  
Wan Amir Shafiq Bin Ab. Nasir ◽  
Rusni Hassan ◽  
Ibrahim Musa Tijani
Keyword(s):  
Data Collection ◽  
Central Bank ◽  
Financial Institutions ◽  
Document Analysis ◽  
Islamic Finance ◽  
Governance Framework ◽  
Business Operation ◽  
Investment Companies ◽  
Islamic Financial Institutions ◽  
Shariah Governance

This paper attempts to examine the absence of a Shariah Governance Framework (SGF) in Malaysian’s Government Linked Investment Companies (GLICs). A GLIC is essential for the Malaysian economy, while SGF is practiced by the Islamic Financial Institutions (IFIs) in Malaysia to ensure end-to-end Shariah compliant process in the business operation of the banks and takaful operators. When the GLIC aims to provide Shariah compliant returns to their investors (public), the move should be supported by all stakeholders as majority of the investors of the GLICs are Muslims, and thus the demand for a Shariah compliant dividend is expected. As for the IFIs in Malaysia, the Central Bank of Malaysia requires all IFIs to establish an SGF to ensure their activities comply with Shariah principles. The question arises whether this requirement should be practiced by the GLICs too. This paper examines the importance of SGF to be established by the GLICs. Since this study is focusing on the importance of SGF in GLICs, interviews and document analysis methods are used for data collection. Keywords: Government Linked Investment Companies, Shariah Governance Framework, Shariah Compliance, Islamic Finance. Abstrak Makalah ini cuba meneliti permasalahan mengenai ketiadaan Kerangka Tadbir Urus Syariah (Shariah Governance Framework atau SGF) di Syarikat Pelaburan Berkaitan Kerajaan (Government Link Investment Companies atau GLIC) di Malaysia. Syarikat Pelaburan Berkaitan Kerajaan adalah penting untuk ekonomi Malaysia, sementara Kerangka Tadbir Urus Syariah merupakan peraturan yang  dipraktikkan oleh Institusi Kewangan Islam (IKI) di Malaysia untuk memastikan proses patuh Syariah dipatuhi secara keseluruhan dalam setiap aspek operasi bank Islam dan pengendali takaful. Apabila Syarikat Pelaburan Berkaitan Kerajaan menjalankan perniagaan bertujuan untuk memberikan pulangan patuh Syariah kepada pelabur mereka, langkah tersebut harus disokong oleh semua pihak yang berkepentingan kerana majoriti pelabur Syarikat Pelaburan Berkaitan Kerajaan  adalah beragama Islam yang mengharapkan dividen yang patuh Syariah. Di Malaysia, Bank Negara Malaysia menghendaki semua IKI mengamalkan Tadbir Urus Syariah untuk memastikan aktiviti mereka mematuhi prinsip Syariah. Persoalan yang timbul adakah syarat ini juga harus dipraktikkan oleh Syarikat Pelaburan Berkaitan Kerajaan. Makalah ini mengkaji sama ada perlunya Kerangka Tadbir Urus Syariah ditubuhkan oleh Syarikat Pelaburan Berkaitan Kerajaan ini. Kajian ini akan memfokuskan pada keperluan Kerangka Tadbir Urus Syariah dalam Syarikat Pelaburan Berkaitan Kerajaan di mana kaedah temuduga dan analisis dokumen adalah kaedah yang digunakan untuk pengumpulan data. Kata Kunci: Syarikat Pelaburan Berkaitan Kerajaan, Kerangka Tadbir Urus Syariah, pematuhan Syariah, kewangan Islam.  

scholarly journals Board, Shariah Committee and Senior Management: Updates on the BNM Shariah Governance Policy Document

2021 ◽  
Author(s):  
Nurul Afidah Mohamad Yusof ◽  
Mohammad Mahbubi Ali
Keyword(s):  
Content Analysis ◽  
Board Of Directors ◽  
Financial Institutions ◽  
Senior Management ◽  
Policy Document ◽  
Governance Framework ◽  
The Board Of Directors ◽  
Islamic Financial Institutions ◽  
Shariah Governance ◽  
New Framework

The paper aims to examine the relevant provisions of the newly released BNM Shariah Governance Policy Document relating to the board of directors, Shariah Committee and senior management of the Islamic Financial Institutions (IFIs) in Malaysia. The study is qualitative-based research. It reviews two documents, i.e. BNM Shariah Governance Framework 2010, and BNM Shariah Governance policy 2019. It uses a content analysis approach to understand and compare the two frameworks from the perspective of the board, the Shariah Committee and senior management. The study finds that SGP 2019 enhanced features of the preceding SGF 2010 revolving around enhanced board oversight and roles over Shariah governance, strengthened Shariah Committee (SC) requirements in providing independent and sound advice to IFIs, as well as a greater expectation for the board and senior management in promoting Shariah compliance culture. This paper examines the areas which have been addressed by the new framework to improve several issues which have been highlighted during the implementation of the previous framework, SGF 2010.

scholarly journals Comparative Analysis on Shariah Governance in Malaysia: SGF 2010, IFSA 2013 and SGPD 2019

2020 ◽  
Vol 10 (1) ◽  
pp. 110 ◽  
Author(s):  
Muhammad Iqmal Hisham Kamaruddin ◽  
Mustafa Mohd Hanefah ◽  
Zurina Shafii ◽  
Supiah Salleh ◽  
Nurazalia Zakaria
Keyword(s):  
Comparative Analysis ◽  
Financial Institutions ◽  
Financial Services ◽  
Islamic Finance ◽  
Policy Document ◽  
Finance Industry ◽  
The World ◽  
Governance Practices ◽  
Islamic Financial Institutions ◽  
Shariah Governance

The main focus of shariah governance for an organization is to ensure that it is comply with shariah laws and regulations. Under Islamic finance industry, shariah governance is being given attention due to rapid growth of this industry in the world. For Malaysia, the authority through Bank Negara Malaysia (BNM) have taken a proactive role by introducing shariah governance guidelines including the Shariah Governance Framework (SGF) 2010, the Islamic Financial Services Act (IFSA) 2013 and the latest is the Shariah Governance Policy Document (SGPD) 2019. These shariah governance guidelines are supposed to support the development of shariah governance practices especially by Islamic Financial Institutions (IFIs) in Malaysia. However, there is limited to none study conducted to compare these guidelines. These shariah governance guidelines is necessary to be compared in order to find out whether these guidelines are complemented each other and to identify any differences among these guidelines. Therefore, the aim of this study is to compare between these shariah governance guidelines. Based on the analysis, it has been found that SGPD 2019 is the most comprehensive covers on shariah governance as compared to IFSA 2013 and SGF 2010. However, these three guidelines still not become comprehensive enough, as there is still limited to none discussion on the definition and objectives of shariah governance itself.

scholarly journals http://habibiaislamicus.com/index.php/hirj/article/view/186

2021 ◽  
Vol 5 (3) ◽  
pp. 1-18
Author(s):  
Zohra Jabeen
Keyword(s):  
Career Counseling ◽  
Financial Institutions ◽  
Islamic Banks ◽  
Governance Framework ◽  
Expert Opinions ◽  
Proper Training ◽  
Islamic Financial Institutions ◽  
Precautionary Measures ◽  
Internal Sources ◽  
Shariah Governance

Providing its services in accordance with the principles of Shariah and maintaining the trust of stakeholders is essential for the existence of Islamic financial institutions. Islamic banks should be run under an integrated and regulated standard system called Shariah Governance Framework (SGF) The SBP, AAOFI and IFSB have proposed separate governance frameworks, However, the framework issued by the SBP is characterized by the fact that external Shariah audit is an important component of it which to ensure the independent and sovereign accountability of Islamic financial institutions. This means that Islamic financial institutions will no longer be content with internal sources such as internal Shariah audits and reviews to verify Shariah compliance, but will necessarily have to verify it with a third external party called an external Shariah audit. But after the mandatory implementation of this type of audit in Pakistan, there are many problems such as disinclination of experts, uniformity in the duration of audit and burden of responsibilities, non-standardization in the affairs of Islamic financial institutions, lack of precautionary measures taken by regulators, lack of curriculum and proper training, lack of detailed framework or format and lack of career counseling etc. This research paper covers these difficulties in the light of expert opinions.

scholarly journals SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010

2017 ◽  
Author(s):  
Rusni Hassan ◽  
Ahmad Azam Othman ◽  
Muhammad Naim Omar ◽  
Mohammad Deen Mohd. Napiah ◽  
Mohamad Asmadi Abdullah ◽  
...  
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Financial Services ◽  
Management Process ◽  
Islamic Banks ◽  
Regulatory Requirements ◽  
Governance Framework ◽  
Risk Management Process ◽  
Islamic Financial Institutions ◽  
Shariah Governance

Abstract: Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and management adhere to the Shariah principles and values. Failure to comply with Shariah, will expose Islamic Financial Institutions (IFIs) to Shariah non-compliance risk. Subsequently, it is an essential duty of the IFIs to manage Shariah risk properly. In order to effectively manage the risk vulnerability of the IFIs, proper measures for risk management have been put in place in different frameworks that are either domestic or international based. In the Malaysian context, IFIs are guided by relevant regulations such as the Shariah Governance Framework 2010, IFSB principles and Islamic Financial Services Act 2013 with regards to Shariah risk management. This research examined the regulatory requirements of the Shariah risk management process for Islamic financial institutions that operate in Malaysia, in the context of the Guidelines on Shariah Governance Framework 2010 issued by the Central Bank of Malaysia. The paper discusses the concept of “risk”, “Shariah risk” and “Shariah non-compliant risk” in the context of Islamic Financial Institutions and also examines the process adopted by the Malaysian IFIs in managing the Shariah risk. The hypotheses that the paper seeks to establish are that there are differences between the concept of Shariah risk and Shariah non-compliant risk; and that the Shariah risk management process adopted by the IFIs are different than the conventional risk management process due to the unique features and requirements of the IFIs.   Keywords: Shariah, Risk management, Islamic Financial Institutions.   Abstrak: Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risiko”, “risiko Syariah” dan “risiko tidak patuh Syariah” dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI.   Kata kunci: Syariah, Pengurusan risiko, Institusi Kewangan Islam.

scholarly journals Aplikasi Kerangka Kerja Tadbir Urus Syariah Dalam Agensi Mengurus Zakat di Melaka

2019 ◽  
pp. 396-412
Author(s):  
Abdul Halim Ismail ◽  
Muhammad Firdaus Tubarri ◽  
Noorzakry Nor Jamal ◽  
Azhana Othman ◽  
Zunaidah Ab Hasan
Keyword(s):  
Financial Institutions ◽  
Islamic Law ◽  
Negative Perception ◽  
Governance Framework ◽  
The Public ◽  
Highly Sensitive ◽  
Islamic Financial Institutions ◽  
Shariah Governance ◽  
Conceptual Study

Integrity in handling zakat funds is a highly sensitive matter to the community if it is not properly managed. The issue of negative perception towards the distribution of zakat in Malaysia is due to the lack of trust from the community toward the management of the agency managing the Zakat. This will therefore affect the collection as well as the distribution of zakat funds to the eight group of Asnaf. Therefore, it is necessary for the zakat agency to build up and create a good shariah governance framework to the needs of Islamic law as a benchmark in order to make sure all activities undertaken are on track. This conceptual study aims to implement Shariah Governance Framework to overcome the distrust of the community towards the management of Zakat agency since they do not have any standard of shariah governance framework, like other Islamic Financial Institutions in Malaysia. In conclusion, the proposed Shariah Governance Framework proposed in this study, will give an implication to restore the trust and positive perceptions among the public. Abstrak Ketulusan dalam mengendalikan dana umat Islam terutamanya zakat adalah suatu perkara yang sangat sensitif kepada masyarakat sekiranya tidak diurus dengan baik. Isu persepsi negatif masyarakat terhadap agihan zakat di Malaysia merupakan punca masalah kepada ketidakpercayaan masyarakat dalam pengurusan Agensi Mengurus Zakat. Ketidakpercayaan ini akan memberi kesan kepada kutipan zakat dan secara tidak langsung akan mempengaruhi dana agihan zakat untuk diagihkan kepada lapan (8) golongan asnaf yang layak. Oleh yang demikian, menjadi satu keperluan kepada Agensi Mengurus Zakat untuk mewujudkan satu kerangka kerja urus tadbir yang baik dan menepati kehendak syarak sebagai kayu ukur kepada segala aktiviti yang dilaksanakan berada di landasan yang betul. Kajian konseptual ini berhasrat untuk menerapkan satu kerangka kerja Tadbir Urus Shariah dalam Agensi Mengurus Zakat untuk mengatasi masalah ketidakpercayaan masyarakat terhadap pengurusan Agensi Mengurus Zakat. Tambahan pula Agensi Mengurus Zakat tidak mempunyai kerangka Tadbir Urus Shariah yang standard seperti mana Institusi Kewangan Islam yang lain di Malaysia. Oleh yang demikian, kerangka kerja tadbir urus shariah yang akan dicadangkan memberi implikasi untuk mengembalikan kepercayaan dan persepsi yang positif dikalangan masyarakat.

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