The Compliance with Shariah Governance System of AAOIFI : A Study on Islamic Banks Bangladesh

Corporate governance for Islamic banking has a unique feature compared with banking conventional. It is required to complement the existing governance framework with shariah governance system to ensure the shariah compliance of all Islamic banking’s operational. Therefore, this study aims to analyze the effect of the practice of shariah governance to the quality of GCG implemented by Islamic banks. Practices of shariah governance are measured by number of shariah board members, doctoral qualification of shariah board and frequency of shariah board meeting. The study finds that shariah governance has a significant impact to the increase quality of GCG in Islamic banks. Another interesting finding is that the increase of credit risk (NPF) leads to the worse of Islamic banks’ corporate governance. ROA and CAR have no significant effect to the quality of corporate governance in Islamic banks. The study recommends that the Islamic banks should improve their shariah governance practices in order to increase their governance performance as well as public confidenceDOI: 10.15408/sjie.v4i2.2301

Download Full-text

دراسة وتحليل تعليمات حوكمة الرقابة الشرعية الصادرة عن بنك الكويت المركزي (Study of the Instructions of Shariah Governance Issued by the Central Bank of Kuwait)

Journal of Islam in Asia (E-ISSN: 2289-8077) ◽

10.31436/jia.v15i1.661 ◽

2018 ◽

Vol 15 (1) ◽

pp. 105-149

Author(s):

عبدالعزيز الناهض ◽

يونس صوالحي

Keyword(s):

Central Bank ◽

The State ◽

Islamic Banking ◽

Islamic Banks ◽

Governance System ◽

History Of ◽

The State Of Kuwait ◽

Shariah Governance

الملخّص تهدف هذه الدراسة إلى تصحيح المفاهيم الواردة في بعض الدراسات السابقة حول نظام الحوكمة الشرعية لدولة الكويت، خصوصاً التصور الخاطئ لبعض هذه الدراسات حول دور هيئة الفتوى بوزارة الأوقاف والشؤون الإسلامية بدولة الكويت. بالإضافة إلى سعي الدراسة لتوثيق تاريخ تطور تعليمات الحوكمة الشرعية الصادرة عن بنك الكويت المركزي، التي قد أغفلت عنها الدراسات السابقة، من خلال تقسيم تاريخ صدور التعليمات إلى ثلاثة مراحل أساسية. وفي الختام تسعى الدراسة إلى تحليل ودراسة تعليمات "حوكمة الرقابة الشرعية في البنوك الكويتية الإسلامية" الصادرة مؤخراً عن بنك الكويت المركزي، مع بيان آثار هذه التعليمات على البنوك الإسلامية العاملة في دولة الكويت. الكلمات المفتاحيّة: مصرفية إسلامية، حوكمة شرعية، رقابة شرعية، بنك الكويت المركزي. Abstract This study aims at rectifying the concepts contained in some previous studies on the Sharia governance system in the State of Kuwait, especially the misconception of some of these studies on the role of the Fatwa Committee in the Ministry of Awqaf and Islamic Affairs. In addition, the study seeks to document the history of the development of the instructions of the SharÊÑah governance issued by the Central Bank of Kuwait, which has been overlooked by previous studies, by dividing the date of issuing the instructions into three basic stages. Lastly, the study seeks to analyze and study the instructions of the "Governance of SharÊÑah Supervision in Kuwaiti Islamic Banks" issued recently by the Central Bank of Kuwait, with the effect of these instructions on the Islamic banks operating in the State of Kuwait. Keywords: Islamic banking, SharÊÑah governance, SharÊÑah supervision, Central Bank of Kuwait.

Download Full-text

Why does Shariah governance framework important for Islamic banks?

Asian Journal of Economics and Banking ◽

10.1108/ajeb-02-2021-0018 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Md. Kausar Alam ◽

Fakir Tajul Islam ◽

Mahfuza Kamal Runy

Keyword(s):

Design Methodology ◽

Islamic Banks ◽

Governance System ◽

Content Type ◽

Governance Framework ◽

Face To Face ◽

Corporate Governance System ◽

Unique Identity ◽

Regulatory Bodies ◽

Shariah Governance

Purpose The purpose of this paper is to explore the question “Why does Shariah Governance Framework (SGF) important for Islamic banks?” Design/methodology/approach A semi-structured face-to-face personal interview is used to accomplish the research objectives. This study has collected data from the concerned bodies related to Shariah Governance (SG) from the central bank and Islamic banks of Bangladesh. Findings This study states SG as a process of confirming Shariah compliance in the overall functions of the Islamic banks, while Shariah denotes some rules, regulations, guidelines, objectives and directions to enhance accurate functions and activities, which are solely based on Shariah principles. SGF is important for Islamic banks to implement Shariah principles, confirm Shariah compliance and monitor the functions of the banks. Besides, it is needed for a well, efficient, effective, profitable business and higher performance and, finally, to eliminate the confusion among the management, executives, conventional bankers and banks. Research limitations/implications This study significantly contributes to the national and global regulatory bodies by providing evidence that why do Islamic banks and financial institutions require a sound SGF. It is recommended that there should be a sound and robust SGF to protect and fulfill the interest, expectations and demands of different stakeholders, which can easily draw their attention, intention and interest. Originality/value This is the first research that extends the literature of Islamic banking and SG by highlighting the importance of SGF. This study claims that to be a complete Islamic bank as well as protecting the unique identity from the general banks and corporate governance system, SG manual is required.

Download Full-text

The Impact of Shariah Governance and Corporate Governance on the Risk Management Practices: Evidence from Local and Foreign Islamic Banks in Malaysia

The Journal of Muamalat and Islamic Finance Research ◽

10.33102/jmifr.v15i2.174 ◽

2018 ◽

Vol 15 (2) ◽

pp. 1-20

Author(s):

Sabri Embi ◽

Zurina Shafii

Keyword(s):

Risk Management ◽

Corporate Governance ◽

Management Practices ◽

Principal Component ◽

T Test ◽

The Body ◽

Primary Data ◽

Islamic Banks ◽

Shariah Governance ◽

The Impact

The purpose of this study is to examine the impact of Shariah governance and corporate governance (CG) on the risk management practices (RMPs) of local Islamic banks and foreign Islamic banks operating in Malaysia. The Shariah governance comprises the Shariah review (SR) and Shariah audit (SA) variables. The study also evaluates the level of RMPs, CG, SR, and SA between these two type of banks. With the aid of SPSS version 20, the items for RMPs, CG, SR, and SA were subjected to principal component analysis (PCA). From the PCA, one component or factor was extracted each for the CG, SR, and RMPs while another two factors were extracted for the SA. Primary data was collected using a self-administered survey questionnaire. The questionnaire covers four aspects ; CG, SR, SA, and RMPs. The data received from the 300 usable questionnaires were subjected to correlation and regression analyses as well as an independent t-test. The result of correlation analysis shows that all the four variables have large positive correlations with each other indicating a strong and significant relationship between them. From the regression analysis undertaken, CG, SR, and SA together explained 52.3 percent of the RMPs and CG emerged as the most influential variable that impacts the RMPs. The independent t-test carried out shows that there were significant differences in the CG and SA between the local and foreign Islamic banks. However, there were no significant differences between the two types of the bank in relation to SR and RMPs. The study has contributed to the body of knowledge and is beneficial to academicians, industry players, regulators, and other stakeholders.

Download Full-text

INTELLECTUAL CAPITAL, FINANCIAL CRISIS AND PERFORMANCE OF ISLAMIC BANKS: DOES SHARIAH GOVERNANCE MATTER?

International Journal of Business and Society ◽

10.33736/ijbs.497.2017 ◽

2017 ◽

Vol 18 (1) ◽

Cited By ~ 2

Author(s):

Tasawar Nawaz

Keyword(s):

Financial Crisis ◽

Intellectual Capital ◽

Economic Performance ◽

Islamic Banks ◽

Knowledge Resources ◽

Finance Industry ◽

Before And After ◽

And Performance ◽

Shariah Governance ◽

The Impact

This paper empirically examines the impact of intellectual capital (IC) and Shariah governance on economic performance of 47 Islamic banks (IBs) operating in the Gulf Cooperation Council (GCC) region in pre- and post-financial crisis period. The analysis suggests that higher IC efficiency helps IBs to improve their odds of survival at all times i.e. before- and after-crisis. Further, higher IC efficiency helps IBs to maintain their profitability i.e. ROA and market valuation i.e. Tobin’s Q at all times. Arguably, knowledge-resources i.e. IC is the main line of defence for IBs against negative shocks. Lastly, the study reveals that Shariah governance alone may fall short in explaining the growth trends in Islamic finance industry. Keywords: Intellectual Capital; Shariah Governance; Financial Crisis; Islamic Worldview; Economic Performance.

Download Full-text

Islamic Banking in Malaysia†

International Journal of Legal Information ◽

10.1017/s0731126500006478 ◽

2012 ◽

Vol 40 (1-2) ◽

pp. 191-201 ◽

Cited By ~ 2

Author(s):

Sherin Kunhibava

Keyword(s):

Central Bank ◽

Islamic Law ◽

Islamic Banking ◽

Islamic Banks ◽

Average Growth ◽

Governance Framework ◽

Finance Industry ◽

Asset Growth ◽

The 1960S ◽

Shariah Governance

AbstractIslamic banking is the conduct of banking according to Shariah or Islamic law. Statistically Islamic banking has had phenomenal growth, according to the Asian Banker Research Group, the world's 100 largest Islamic banks have set an annual asset growth rate of 26.7% and the global Islamic finance industry is experiencing an average growth of 15-20% annually1. Recently the Prime Minister of Malaysia commented that Malaysia has been maintaining its leadership in Islamic banking and finance for over three decades2. As an International leader in Islamic banking, it would be interesting to explore the development of Islamic banking in Malaysia. This will be the objective of this paper. This paper will focus on the historical development of Islamic banking in Malaysia, from the creation of the Haj Pilgrim's Fund Board in the 1960s to the current Islamic banking scene of 17 local Islamic banks and five International Islamic banks in operation. This paper will also explore the unique regulatory and governance framework of Islamic banking in Malaysia, by touching on the Islamic banking Act 1983, the Central Bank of Malaysia Act 2009, the Banking and Financial Institutions Act 1989 and the Shariah Governance Framework introduced in 2011 by the Central Bank of Malaysia. This paper will also briefly introduce how Islamic banking works.

Download Full-text

Shariah supervisory systems in Islamic finance institutions across the OIC member countries

Journal of Financial Regulation and Compliance ◽

10.1108/jfrc-02-2014-0011 ◽

2015 ◽

Vol 23 (2) ◽

pp. 135-160 ◽

Cited By ~ 10

Author(s):

Rihab Grassa

Keyword(s):

Critical Review ◽

Islamic Finance ◽

Governance System ◽

Member States ◽

Content Type ◽

Supervisory System ◽

Finance Industry ◽

Regulatory Frameworks ◽

Shariah Governance ◽

Supervisory Practices

Purpose – This paper aims to discuss the different practices and regulatory frameworks of Shariah supervision in Islamic Financial Institutions (IFIs) across Organisation of Islamic Cooperation (OIC) member states and to identify the gaps in current Shariah supervisory practices. Parallel with the rapid growth of Islamic finance worldwide, corporate governance has received a considerable amount of attention in Islamic finance. Shariah is a unique characteristic of Islamic finance. That is why the need for a good and efficient Shariah governance system for IFIs is considered to be a crucial requirement to ensure the development and the stability of the Islamic finance industry. Design/methodology/approach – The paper is based on critical review of current laws and regulations for IFIs; this provides a reflective synthesis on the practical work of the Shariah supervisory system across the 25 different OIC member states. Findings – The paper reveals several findings. First, the authors observe a weak and poor Shariah supervisory system in most OIC member states. Furthermore, the authors detect various gaps in the current Shariah supervisory practices. Most of these shortfalls are linked to the current regulatory frameworks: the roles and the responsibilities of the national Shariah authority, and the institutional Shariah board’s duties and attributes. Originality/value – This paper’s originality and value lies in its critical review of current Shariah supervisory practices across 25 OIC member states. Also, the paper puts forward various suggestions to the regulatory authorities and to the Islamic Financial Services Board to enhance the Shariah governance system and to standardize the different practices of Shariah governance worldwide.

Download Full-text

دراسة مقارنة بين تعليمات الحوكمة الصادرة من مصرف قطر المركزي ونظام الحوكمة الصادر من هيئة قطر للأسواق المالية (A Comparison Study Between Governance instructions issued by Qatar Central Bank and Governance System issued by Qatar Financial Markets Authority)

Journal of Islam in Asia (E-ISSN: 2289-8077) ◽

10.31436/jia.v17i4.867 ◽

2020 ◽

Vol 17 (4) ◽

pp. 78-118

Author(s):

أسماء القره داغي ◽

عارف علي عارف ◽

عزنان حسن ◽

عبد الله علي الملاهي

Keyword(s):

Corporate Governance ◽

Central Bank ◽

Financial Markets ◽

Analytical Method ◽

Analytical Approach ◽

Central Banks ◽

Islamic Banks ◽

Comparison Study ◽

Governance System

أصبحت الحوكمة إحدى الركائز الأساسية التي يجب على جميع الوحدات الاقتصادية أن تطبق مبادئها ومعاييرها وذلك للحد من تعرض الشركات والبنوك للفشل المالي. تهدف هذه الدراسة لتوضح الاختلافات الأساسية بين تعليمات الحوكمة الصادرة من مصرف قطر المركزي وتعليمات الحوكمة الصادرة من هيئة قطر للأسواق المالية، وذلك من خلال بيان مفهوم الحوكمة وإطارها التشريعي والتاريخي، وأبرز السلطات الرقابية والإشرافية العالمية والإسلامية التي اهتمت وأصدرت معايير للحوكمة، ثم ناقشت المعايير الصادرة من أبرز سلطتين رقابيتين في قطر وهما مصرف قطر المركزي وهيئة قطر للأسواق المالية، والفرق بينهما وأيهما أولى بالتطبيق من قبل المصارف القطرية سواء الإسلامية أو التقليدية، واتبع الباحثون المنهج الوصفي من خلال دراسة الإطار النظري للدراسة، وتوضيح الاختلافات الأساسية من خلال المقارنة النظرية بين مبادئ الحوكمة للسلطات الرقابية والإشرافية القطرية، ونتج عن الدراسة أن هناك وجود فروق أساسية فيما يخص المصارف وأن تعليمات مصرف قطر أولى بالتطبيق بالنسبة للمصارف. الكلمات المفتاحيّة: الحوكمة، مصرف قطر المركزي، تعليمات الحوكمة، هيئة قطر للأسواق المالية، نظام الحوكمة. Abstract This study aims to clarify the Fundamental differences between Governance instructions issued by Qatar Central Bank and Governance System issued by Qatar Financial Markets Authority. Moreover, concept of corporate governance, legislative and historical framework, most important supervisory authorities whether global, Islamic or in Qatar are discuss. Then, it discusses the main differences between standards which issued by Qatar Central Bank and Qatar Financial Markets Authority, and whichever is Islamic Banks in Qatar should apply their Standards. The researcher used the descriptive analytical method to address the main principals. The analytical approach was also used by analyze the Governance instructions issued by Qatar Central Bank and Governance System issued by Qatar Financial Markets Authority. The result of the study, there are basic differences with regard to banks, and that Qatar Bank’s instructions are first to be applied with regard to banks. Keywords: Corporate Governance, Qatar Central Banks, Governance Instructions, Qatar Financial Markets Authority, Governance System.

Download Full-text

Disclosure, Shariah governance and financial performance in Islamic banks

Asian Journal of Economics and Banking ◽

10.1108/ajeb-03-2021-0038 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Mariem Ben Abdallah ◽

Slah Bahloul

Keyword(s):

Financial Performance ◽

Least Squares ◽

Good Governance ◽

Generalized Method Of Moments ◽

Islamic Banks ◽

Content Type ◽

Governance Indicators ◽

Shariah Governance ◽

The Impact ◽

Robustness Check

PurposeThis study aims at investigating the impact of the disclosure and the Shariah governance on the financial performance in MENASA (Middle East, North Africa and Southeast Asia) Islamic banks.Design/methodology/approachWe use the Generalized Least Squares (GLS) regression models to check the interdependence relationship between the disclosure, the Shariah governance and the financial performance of 47 Islamic banks (IBs) from ten countries operating in MENASA region. The sample period is from 2012 to 2019. In these regressions models, Return on Assets (ROA) and Return on Equity (ROE) are the dependent variables. The disclosure and the Shariah governance indicators are the independent factors. To measure the Shariah governance, we use the three sub-indices, which are the Board of Directors (BOD), the Audit Committee (AC) and the Shariah Supervisory Board (SSB). Size, Leverage and Age of the bank are used as control variables. We also used The Generalized Method of Moments (GMM) and the three-stage least squares (3SLS) estimations for robustness check.FindingsResult shows a negative relationship between the disclosure and the two performance measures in IBs. Furthermore, as far as the governance indicators are concerned, we found that the BOD and AC, as well as the BOD and SSB, have a positive and significant impact on the ROA and ROE, respectively. This reveals that good governance had a significant association with higher performance in MENASA IBs.Originality/valueThe paper considers both IBs that adopt mandatory as well as voluntary AAOIFI standards and the GLS method to investigate the impact of the AAOIFI disclosure and the Shariah governance on ROA and ROE. Also, it uses the GMM and the 3SLS estimations for robustness check. It is relevant for researchers, policymakers and stakeholders concerned with IBs' performance.

Download Full-text

Implementasi Shariah Governance serta Implikasinya terhadap Reputasi dan Kepercayaan Bank Syariah

Al-Tahrir Jurnal Pemikiran Islam ◽

10.21154/al-tahrir.v12i1.48 ◽

2012 ◽

Vol 12 (1) ◽

pp. 87

Author(s):

Rahman El Junusi

Keyword(s):

Market Share ◽

Structural Equation ◽

Goodness Of Fit ◽

Descriptive Analysis ◽

Measurement Instrument ◽

Equation Modeling ◽

Average Score ◽

Islamic Banking ◽

Islamic Banks ◽

Shariah Governance

Syariah banking is currently growing rapidly and become part of financial life in the Islamic world. However, there are two important realities to observe in the life of Islamic Banking in Indonesia. First, Islamic banks are faced with a market share that has not met the target by 5 percent. Second, compliance of Islamic banking to Islamic principles was decline. Therefore, it is needed a strategy of development through the implementation of syariah governance. Syariah Governance implementation is expected to have an impact on reputation and customer confidence which in turn can increase the market share of syariah banks. Based on this background, the research problem is how the implementation of syariah governance and its impact on the reputation and confidence in Islamic banks. This research object is Muamalat banks operating in Central Java (Semarang, Solo, Purwokerto). The research sample is 200 respondents using the techniques of analytical judgment. Measurement instrument using 1-5 Likert scale, from strongly disagree (STS) untill Strongly Agree (SS). Firth to know implementation of Shariah governance, it is used a quantitative descriptive analysis using the average (mean). Second, to examine the effect of the implementation of Shariah governance to reputation and customer confidence in Islamic banks, it uses Structur Equation Model (SEM) with program AMOS 4.0 Engineering Structural Equation Modeling (SEM) which consists of two kinds of technical analysis, the goodness of fit and regression weight on the SEM to assess the suitability of the model estimation based on measuring the level of significance of some of the goodness of fit good and bad in a model, so the degree of the model accuracy is determined by the cut-off value.This research concluded that calculations of total assessment on the implementation of Shariah Governance Islamic bank (Bank Muamalat) showed an average score of 3.42 7 in good categories. It shows that shariah compliance is a indicator giving biggest contribution in the implementation of Islamic governance. Compliance to sharia is the main factor to costumer in establishing partnership with syariah banks and deciding to retain syariah banks.

Download Full-text