scholarly journals Islamic Financial Services Act (IFSA) 2013 and the Sharīʿah-compliance requirement of the Islamic finance industry in Malaysia

2018 ◽  
Vol 10 (1) ◽  
pp. 94-101 ◽  
Author(s):  
Mohamad Akram Laldin ◽  
Hafas Furqani
Keyword(s):  
Content Analysis ◽  
Financial Institutions ◽  
Financial Services ◽  
Design Methodology ◽  
Islamic Finance ◽  
Content Type ◽  
Governance Framework ◽  
Finance Industry ◽  
Islamic Financial Institutions ◽  
Comprehensive Framework

Purpose This paper aims to observe the development of the Sharīʿah governance framework (SGF) and practice in Islamic financial institutions (IFIs) in Malaysia. Design/methodology/approach The study is a qualitative-based research. It uses various documents and content analysis approach to understand and analyze the structure, process and practice of SGF in IFIs in Malaysia. Findings It is found that the Central Bank of Malaysia, Bank Negara Malaysia, has attempted to develop a comprehensive framework of Sharīʿah governance for IFIs in Malaysia. The framework governs the practice of the industry, covers stakeholders’ scope of duties and responsibilities and provides details on processes and procedures in the operations of IFIs to achieve the objective of Sharīʿah compliance. To maintain the relevance of the SGF to the needs of the industry, the framework has also been updated recently in 2017. The amendments aim to strengthen the effectiveness of Sharīʿah governance implementation within the Islamic finance industry. Originality/value This study attempts to comprehensively examine the evolution of the SGF Sharīʿah governance framework for IFIs in Malaysia. The Malaysian model of the SGF is unique and could be emulated by other countries in developing the Islamic finance industry in their respective jurisdictions.

Limited purpose banking (LPB) and Islamic finance

Humanomics ◽  
2014 ◽  
Vol 30 (2) ◽  
pp. 122-135 ◽  
Author(s):  
Edib Smolo ◽  
Abbas Mirakhor
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Financial System ◽  
Islamic Finance ◽  
Extensive Literature ◽  
Content Type ◽  
Finance Industry ◽  
Islamic Financial Institutions ◽  
Alternative Solutions ◽  
Practical Implications

Purpose – This paper primarily aims to review and analyze a new model for Islamic finance based on Laurence J. Kotlikoff's idea of limited purpose banking (LPB). In addition, this paper aims to highlight, explain and discuss various aspects of LPB and how it suits the original aspirations of pioneer writers in Islamic finance. Design/methodology/approach – Based on an extensive literature review, this paper aims to highlight, explain and discuss the reform of the Islamic finance industry based on Kotlikoff's model of LPB. Findings – Based on a modified LPB model, Islamic financial institutions could be established to provide specific services with clear aims and objectives. These LPB Islamic financial institutions would operate in a similar way to LPB. Research limitations/implications – As there is no perfect plan, the proposal of this paper is far from being perfect and is open to discussions and improvements. The paper will, hopefully, spark off quite a discussion on the topic; may result in a better understanding of the model; and provide some alternative solutions to the current structurally ill financial system. Practical implications – The paper provides some practical ideas for a better implementation of Shari'ah principles in financial intermediation of the Islamic financial system. Originality/value – Kotlikoff's LPB proposal for reforming the financial system is new and has been directed to the conventional financial system. This paper represents the first attempt to apply his proposal to the Islamic finance industry.

The actualization of maqāṣid al-Sharīʿah in Islamic finance: a conceptual framework

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abu Talib Mohammad Monawer ◽  
Noor Naemah Abdul Rahman ◽  
Ameen Ahmed Abdullah Qasem Al-‎Nahari ◽  
Luqman Haji Abdullah ◽  
Abdul Karim Ali ◽  
...  
Keyword(s):  
Conceptual Framework ◽  
Product Design ◽  
Qualitative Content Analysis ◽  
Group Discussion ◽  
Islamic Finance ◽  
Content Type ◽  
Finance Industry ◽  
Product Consumption ◽  
Islamic Financial Institutions ◽  
Comprehensive Framework

Purpose This paper aims to formulate a conceptual framework that will facilitate the actualization of maqāṣid al-Sharīʿah in product design and consumption within Islamic financial institutions (IFIs). Design/methodology/approach This paper relies on the classical and contemporary literature on maqāṣid al-Sharīʿah and Islamic finance and adopts a qualitative content analysis method and an inductive approach to outline the constituent elements that formulate the framework. Findings This study determines six vital constituents of maqāṣid al-Sharīʿah, namely, parameters of maqāṣid, particular objectives, appropriate means, micro provisions, level of need and legal maxims to develop a conceptual framework of actualizing maqāṣid al-Sharīʿah in Islamic finance. The framework covers the following three stages: identification of maqāṣid, operationalization of maqāṣid in product design and consumption based on maqāṣid. Research limitations/implications This paper proposes a conceptual framework without investigating the practice of any particular industry or products. Further research would focus on formulating a practical framework based on a focus group discussion with industry experts, elaborating the parameters of maqāṣid, scrutinizing the maqāṣid available in the literature by the parameters of maqāṣid and assessing the IFIs’ products and services using the proposed framework. Practical implications This paper provides insights into the importance of maqāṣid elements and the effects of overlooking them on IFIs and customers’ product consumption. Furthermore, a major implication of the proposed framework is to learn how to use the maqāṣid approach as the baseline for designing new financial products. Originality/value The novelty of this paper lies in its pioneering attempt of harmonizing all essential maqāṣid elements and using them as constituents to formulate a comprehensive framework that actualizes maqāṣid al-Sharīʿah in the Islamic finance industry.

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.

Musharakah Mutanaqisah home financing: issues in practice

2018 ◽  
Vol 9 (1) ◽  
pp. 91-103 ◽  
Author(s):  
Alam Asadov ◽  
Zulkarnain Bin Muhamad Sori ◽  
Shamsher Mohamad Ramadilli ◽  
Zaheer Anwer ◽  
Shinaj Valangattil Shamsudheen
Keyword(s):  
Financial Institutions ◽  
Current Mode ◽  
Fair Value ◽  
The Body ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Periodic Review ◽  
Content Type ◽  
Finance Industry ◽  
Islamic Financial Institutions

Purpose This paper aims to examine the practical issues in the Musharakah Mutanaqisah (MM) financing and subsequently, recommends possible solutions to mitigate these issues and improve the current practice. Design/methodology/approach This paper analyses the theory and current practices of MM offered by Islamic banks. Findings It is suggested that Islamic financial institutions consider revaluation of property’s value to its fair value, especially during termination of MM contract and annual or agreed periodic review of the market value of the assets to determine the “rental” payments by the customer. It is also recommended that Islamic financial institutions should share all associated costs in performing the contract. Research limitations/implications Research findings reported in this paper contribute to the body of knowledge on MM in general and to the Islamic finance practices in Malaysia and abroad. Indeed, the Malaysia Central Bank (i.e. Bank Negara Malaysia) should form a special committee to look into the issues highlighted in this paper and recommend strict guidelines for Islamic financial institutions to improve their practices. Practical implications Islamic banks should extend the use of MM contract in automobile and trade financing where rent or profit could be easily identified and value of the asset is more certain. The regulators and Islamic financial standard setting authorities need to oversee the Shari’ah board decisions on MM contracts and keep the gates in the interest of ensuring a more viable and authentic Islamic finance industry. Originality/value This paper briefly views the current mode of MM contracts, specifically for home financing, and highlights the incompliance to Shari’ah requirements in exercising these contracts in practice.

Executives’ observance of zakat among Islamic financial institutions: evidence from Bahrain and Malaysia

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jessie P.H. Poon ◽  
Yew Wah Chow ◽  
Michael Ewers ◽  
Trina Hamilton
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Change Agents ◽  
Islamic Finance ◽  
Board Members ◽  
Content Type ◽  
Financial Firms ◽  
Management Positions ◽  
The Board Of Directors ◽  
Islamic Financial Institutions

Purpose The purpose of this paper is to examine the influence of Shariah board members and managerial networking on zakat observance among executives of Islamic financial firms (IFFs) in Bahrain and Malaysia. Design/methodology/approach The methodology is based on surveys administered to 106 respondents and personal interviews conducted with individuals holding management positions in IFFs. Findings The paper finds that: networking among IFF executives in Bahrain positively influences their observance and perception of zakat in their firms; and higher representation of Shariah on the board of directors increases executives’ favorable perception and observance of zakat in Malaysia. Differences in findings may be explained by Bahrain’s global Shariah institutions where networking offers opportunities for socialization of zakat ethics. In Malaysia, on the other hand, Shariah directorship sets the pace and direction of zakat ethics. Originality/value The seminal work of DiMaggio and Powell (1991) on neo-institutional theory has drawn attention to executives’ agency in creating cognitive frameworks that help promote the development of firm standards and norms. However, application of the theory to Islamic finance is largely absent. This paper contributes to an empirical understanding of the theory by highlighting sources of IFFs’ social agency in the development of zakat norm and its observance, namely, managerial networking and Shariah directors as change agents.

Realising financial inclusion in Islamic finance

2019 ◽  
Vol 11 (1) ◽  
pp. 143-160 ◽  
Author(s):  
Akilu Aliyu Shinkafi ◽  
Sani Yahaya ◽  
Tijjani Alhaji Sani
Keyword(s):  
Financial Institutions ◽  
Low Income ◽  
Financial Services ◽  
Public Awareness ◽  
Financial Inclusion ◽  
Islamic Finance ◽  
Content Type ◽  
Financial Infrastructure ◽  
Islamic Financial Institutions ◽  
Regulatory Commitment

Purpose The purpose of this paper is to evolve a theoretical account that highlights the determinations for achieving financial inclusion in Islamic finance. Design/methodology/approach The methodology used is a library approach where the existing and relevant document remains the sources of concern. Findings The outcome of the study designates that robust technology; microcredit and microfinance services; legal and regulatory commitment of the regulators and policymakers of the Islamic financial institutions; extensive public awareness of Islamic financial services and products; financial proficiency and literacy; and financial infrastructure are some of the imperative drives for realising financial inclusion particularly for women, low income earners and rural poor. Research limitations/implications The paper limited itself to realising financial inclusion in Islamic finance. Thus, anything beyond the stated limitation is outside the scope of our objective. The paper has an inference for the concerned professional bodies, regulators, policymakers, stakeholders and practitioners of Islamic financial institutions. Originality/value The paper is original in its nature, it is also a pearl and a reference to those who may conceive and cherish the relevance of its capacity.

scholarly journals Islamic finance: financial inclusion or migration?

2018 ◽  
Vol 10 (2) ◽  
pp. 277-288 ◽  
Author(s):  
Ahmed Tahiri Jouti
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Design Methodology ◽  
Financial Inclusion ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Content Type ◽  
The Stability ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to define a methodology to assess the impact of introducing Islamic finance on financial inclusion. Design/methodology/approach The paper is based on a literature review to understand the link between Islamic finance and financial inclusion. The second part of the paper presents a conceptual framework to assess the impact of introducing Islamic finance on financial inclusion in a defined context based on the profiling of people interested in Islamic finance. Findings The paper brings an insight on the impact of introducing Islamic finance. Indeed, it could cause a financial migration to Islamic banks that can take many forms and depends on many factors that call for deep analysis. Research limitations/implications The paper would help financial authorities and financial institutions to measure the impact of introducing Islamic finance on their businesses and the stability of the whole system. Practical implications Islamic finance can not only enhance financial inclusion but also create financial migration. The two implications can vary from one context to another. Social implications Islamic finance can contribute in the effort of including “self-excluded” people with religious concerns as well as people without access to financial services. Originality/value This paper promotes the idea that Islamic finance is not exclusively a way to enhance financial inclusion.

Islamic financial institutions: conduits for money laundering?

2020 ◽  
Vol 23 (2) ◽  
pp. 285-295
Author(s):  
Siti Faridah Abdul Jabbar
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Financial Services ◽  
Design Methodology ◽  
Financial Services Industry ◽  
Review Of Literature ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Services Industry

Purpose The purpose of this paper is to discuss various situations in the Islamic financial services industry that are asserted to facilitate money laundering and the counter-arguments to the assertions. Design/methodology/approach The approach adopted by this paper is a review of literature and of several practices of Islamic financial institutions in a number of countries. Findings There is no evidence to support the contentions that Islamic financial institutions facilitate money laundering. Further, Islamic financial institutions are not any more susceptible to money laundering than conventional financial institutions are. Originality/value This paper demonstrates that Islamic financial institutions are not conduits for money laundering.

Building trust in Islamic finance products and services

2017 ◽  
Vol 12 (3) ◽  
pp. 356-372 ◽  
Author(s):  
Syed Nazim Ali
Keyword(s):  
Financial Services ◽  
Islamic Finance ◽  
Illustrative Case ◽  
Content Type ◽  
Finance Industry ◽  
The Past ◽  
Building Trust ◽  
Central Tenet ◽  
Stake Holder ◽  
Perceived Impact

Purpose With the increasing instances of malfeasance and frauds coming to light in the financial services industry, trust has become a key concern for customers. Fortunately, in the case of Islamic Finance, trust is a central tenet, and its importance can be seen through the emphasis of Amanah or trustworthiness that should be present in every financial transaction. However, it has been argued that the principle of trust has not been truly realized in Islamic Finance, or that there are still issues of distrust regarding anything which is obtrusively branded as “Islamic”. In this paper, the author will analyze the reasons for gaps between the expectations and reality of the finance industry today by looking at the main factors contributing to distrust among the different stakeholders and the perceived impact of the distrust on the industry and the general public. It then focuses on the past and ongoing efforts by academia to bridge these gaps between the different stake holder groups with the help of illustrative case studies as well as recommends future steps to be taken to ensure a stronger foundation of trust within the Islamic Finance community.

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.

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