Fintech and Its Potential Impact on Islamic Banking and Finance Industry: A Case Study of Brunei Darussalam and Malaysia

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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Do academic and professional institutions promote the awareness and knowledge of Islamic banking and finance in Nigeria?

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-05-2020-0171 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Umar Habibu Umar ◽

Mustapha AbuBakar ◽

Abubakar Jamilu Baita ◽

Tasiu Tijjani Kademi ◽

Md Harashid Haron

Keyword(s):

Training Programs ◽

Continuing Professional Development ◽

Professional Associations ◽

Islamic Banking ◽

Content Type ◽

Fully Integrated ◽

Banking And Finance ◽

Finance Industry ◽

National University ◽

And Training

Purpose The purpose of this study is to examine the contribution of academic and professional institutions in promoting the awareness and knowledge of Islamic banking and finance in Nigeria. Design/methodology/approach The data were generated through a documentary research method by examining the Benchmark Minimum Academic Standards (BMAS) for Nigerian universities and Nigerian university curricula for the relevant undergraduate programs, as well as examination syllabi and training brochures for the relevant professional associations. Findings The study found that universities do not promote significantly the awareness and knowledge of Islamic banking and finance. Similarly, the relevant professional associations through their examinations and training programs contribute little or nothing to the promotion of awareness and knowledge. Research limitations/implications This study solely relied upon documentary evidence upon which the findings were based. In addition, for academic institutions, only undergraduate BMAS and curricula were examined. Practical implications There should be collaborations between the National University Commission of Nigeria, relevant Islamic and non-Islamic professional bodies and Nigerian Universities to ensure that courses (subjects) that could promote the awareness and knowledge of Islamic banking and finance are fully integrated into academic and professional curricula and training programs. Social implications The integration of an adequate number of relevant courses/topics into academic curricula and professional institution examination syllabi and their Mandatory Continuing Professional Development programs would greatly contribute to the production of competent and skillful employees to work for the growth and development of the Islamic banking and finance industry. Originality/value This study provides better ways of ensuring that knowledgeable and qualified employees are produced to work for the sustainability of the global Islamic banking and finance industry.

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What can the Banking Royal Commission achieve: Regulating for good corporate culture?

Alternative Law Journal ◽

10.1177/1037969x18772153 ◽

2018 ◽

Vol 43 (2) ◽

pp. 81-88 ◽

Cited By ~ 3

Author(s):

David Wishart ◽

Ann Wardrop

Keyword(s):

Corporate Culture ◽

Financial Services ◽

Royal Commission ◽

Corporate Misconduct ◽

Banking And Finance ◽

Finance Industry

This article identifies corporate culture as a key contributor to the sort of egregious corporate misconduct identified in the current Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industries. The authors outline existing strategies for regulating culture in the banking and finance industry and consider the likely outcomes of the Banking Royal Commission. Taking the proposed Banking Executive Accountability Regime as a case study, the authors argue that the industry’s privacy, autonomy and competition concerns, forcefully argued in policymaking circles, may well stymie any proposals that may be put forward, no matter how bad the conduct revealed turns out to be.

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The Role of Musharakah in the Economic Development of Tehsil Dargai, District Malakand, Khyber Pakhtunkhwa, Pakistan

Islamic Banking and Finance Review ◽

10.32350/ibfr.2019.06.05 ◽

2019 ◽

Vol 6 ◽

pp. 80-97

Author(s):

Suhail Ahmad ◽

Ejaz Aslam ◽

Prof. Dr. S. Ghiasul Haq ◽

Prof. Dr. Mohd Ma'Sum Billah

Keyword(s):

Response Rate ◽

Islamic Finance ◽

Islamic Banking ◽

Limited Data ◽

Khyber Pakhtunkhwa ◽

Banking And Finance ◽

Finance Industry ◽

Muslim Countries ◽

Job Opportunities

Islamic finance industry has been growing for the last twenty years, both in Muslim and non-Muslim countries around the world. There are different modes of Islamic finance which provide job opportunities across the globe. In Pakistan, the contemporaneous growth of Islamic banking and finance is not different from other countries. Islamic banking and finance does not only provide employment for individuals, indeed it also offers various products and services to customers across the country. Musharakah is a form of business in Islamic finance that is being adopted rapidly by most of the customers in Islamic banking and finance institutions. Therefore, the purpose of this study is to examine the role of Islamic finance, mainly how Musharakah is playing its due role in creating employment and maintaining sustainable development projects which in turn are causes of the development of the economy, particularly of Tehsil Dargai. For this purpose, this study collected data through a questionnaire that was randomly distributed among 100 respondents in Tehsil Dargai, District Malakand, Khyber Pakhtunkhwa (KP), Pakistan and the response rate was 60%. We found that Islamic finance is rapidly growing in Dargai; indeed, people are practicing different modes of Islamic finance and Musharakah is the most popular form of Islamic finance in this area. This study utilizes limited data because it was only conducted in Dargai.

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Dispute Resolution for Islamic Banks in Indonesia

International Journal of Islamic Economics and Finance (IJIEF) ◽

10.18196/ijief.v4i0.10084 ◽

2021 ◽

Vol 4 (SI) ◽

Author(s):

Atharyanshah Puneri

Keyword(s):

Dispute Resolution ◽

Alternative Dispute Resolution ◽

Legal Framework ◽

Islamic Banking ◽

Islamic Banks ◽

Banking And Finance ◽

Finance Industry ◽

Positive Law ◽

Islamic Financial Institutions ◽

Dispute Resolution Mechanism

The rapid growth of Islamic banking and finance industry demanded an improvement in term of standards, frameworks, policy, technologies, resources, and guidelines in order to go beyond without compromising the core values of Islam itself. In the context of legal framework of Islamic banking and finance, it is most likely this industry needs to be highly regulated in order to avoid manipulation and abuse by the irresponsible parties. One of the crucial issue in the area of Islamic Banks in Indonesia is regarding about the dispute resolution mechanism for Islamic Banks. Based on Indonesian positive law, there are two alternative dispute resolution mechanisms that can be exercised by parties to settle disputes in cases involving Islamic Financial Institutions (IFIs) namely through litigation or non-litigation. Litigation comes under the jurisdiction of the Religious Court. Researcher in this study are look deeper into the dispute resolution mechanism for Islamic Banks in Indonesia, as well as going through some decided cases. And based on the study done, it was found that alternative dispute resolution mechanism is more effective to resolve Islamic Banks dispute rather than litigation. In the future, researchers may conduct more research to examine deeper about the dispute resolution mechanism for the whole Islamic Economics and Finance in Indonesia. Moreover, researchers need to look at the regulators' and legislators’ perception towards dispute resolution and legal environment.

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Managing Shariah Non-Compliance Risk via Islamic Dispute Resolution

Journal of Risk and Financial Management ◽

10.3390/jrfm13010002 ◽

2019 ◽

Vol 13 (1) ◽

pp. 2 ◽

Cited By ~ 1

Author(s):

Maria Bhatti

Keyword(s):

Dispute Resolution ◽

Institutional Arrangements ◽

Islamic Finance ◽

Islamic Banking ◽

Legal Analysis ◽

Normative Approach ◽

Banking And Finance ◽

Finance Industry ◽

Governance Systems ◽

Shariah Governance

This article discusses Shariah non-compliance risk as a form of operational risk intending to ensure that operations in the Islamic and banking finance industry comply with Shariah procedures. In the field of Islamic finance, Shariah non-compliance risk refers to the possibility that Islamic finance transactions may be challenged based on Shariah non-compliance. This article uses a comparative and normative approach as well as a legal analysis of the case of Beximco. The article proposes the management of Shariah non-compliance risk by augmenting the effectiveness of Shariah governance systems with Islamic banking and finance arbitration; arbitration should be an enforced part of Islamic finance institutional arrangements—as it always has been classically—to provide flexibility for dispute resolution. To this end, the article examines contemporary implementations of Shariah arbitration rules to assess how Shariah non-compliance risk can be better managed via Islamic dispute resolution procedures.

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The internal challenges facing Islamic finance industry

International Journal of Islamic and Middle Eastern Finance and Management ◽

10.1108/imefm-05-2015-0056 ◽

2016 ◽

Vol 9 (2) ◽

pp. 222-235 ◽

Cited By ~ 5

Author(s):

Abdulazeem Abozaid

Keyword(s):

Product Development ◽

Design Methodology ◽

Islamic Finance ◽

Islamic Banking ◽

Islamic Banks ◽

Content Type ◽

Banking And Finance ◽

Finance Industry ◽

Development Methodology ◽

Shariah Governance

Purpose The paper aims to highlight the challenges facing Islamic finance industry and outline the prospectus of what constitutes a sound Islamic banking product in terms of both its Shariah control and product development methodology. Design/methodology/approach The paper analytically addresses the internal challenges facing Islamic finance industry by highlighting, first, the deficiencies in the existing Shariah supervisory work and, then, the deficiencies in the product development methodology followed in Islamic banks. Findings Islamic banking and finance is facing some internal challenges which require immediate action. Although facing the external challenges may be beyond the capacity of the industry players, Islamic banks have no excuse to overlook or turn a blind eye to their internal challenges which can be overcome by enacting Shariah governance for both products and Shariah control and reforming the methodology of product development. Originality/value This paper highlights an issue that has not received the needed attention, and it proposes the necessary solutions to the problems it identifies.

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ISU GLOBAL PEREKONOMIAN ISLAM: Telaah Kritis terhadap Tata Kelola dan Aktivitas Lembaga-lembaga Keuangan Islam

JESI (Jurnal Ekonomi Syariah Indonesia) ◽

10.21927/jesi.2011.1(2).111-131 ◽

2016 ◽

Vol 1 (2) ◽

pp. 111

Author(s):

Muhdi Kholil

Keyword(s):

Financial Institutions ◽

Islamic Finance ◽

Islamic Banking ◽

International Forum ◽

Banking And Finance ◽

Finance Industry ◽

Financial Products ◽

Economic Practice ◽

The World ◽

Islamic Economic

Indonesia is to be known widely by the world, which has Islamic finance system different from most countries. Indonesia which is in the international forum of financial syriah known "orthodox" or conservative in the application of Islamic principles recognized the economic practice of Islam which is closer to the economic substance of Islam, and relatively completed all aspects of the economy. Islamic economic development not only in the sectors has been developed such as banking, capital markets and non-bank financial institutions other, but also in extended development of the microfinance sector, social and financial practices of real business to meet Islamic principles.The composition and transaction of Islamic financial products’ Indonesia is a fact that is not owned by other countries which are also developing Islamic banking and finance industry. No wonder, since the majority of developing countries in the world of sharia finance industry with the approach of imitation (mimicry) with conventional, and many experts doubt the originality/economic system of Islamic finance, both conventional and expert on Islamic scholars. But on many opportunities, from seminars, conferences and working group forum, many countries are aware that Indonesia has a different form of sharia industry, the application of Islamic finance that has another color.Keyword: Economics, Sharia, Indonesia.

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Shari'ah Governance for Islamic Banking

Growth and Emerging Prospects of International Islamic Banking - Advances in Finance, Accounting, and Economics ◽

10.4018/978-1-7998-1611-9.ch012 ◽

2020 ◽

pp. 213-244 ◽

Cited By ~ 1

Author(s):

Naji Mansour Nomran ◽

Razali Haron

Keyword(s):

Descriptive Analysis ◽

The Other ◽

Islamic Banking ◽

Banking And Finance ◽

Finance Industry ◽

Regulatory Systems ◽

Supervisory Boards ◽

Supervision Model ◽

Regulatory Model ◽

Global Growth

Due to the rapid global growth in Islamic banking and finance industry, supervisory authorities in many countries have developed different Shari'ah governance (SG) regulatory systems to regulate this industry. However, the current SG practices across jurisdictions still suffer from some drawbacks. This chapter highlights some issues related to the differences across jurisdictions in adopting various SG regulatory practices and supports the discussion using descriptive analysis. The findings indicate that Islamic banks (IBs) demonstrate higher levels of financial performance, on average, when located in regulated jurisdictions, in jurisdictions that restrict cross-membership of scholars in Shari'ah Supervisory Boards (SSBs), and in jurisdictions adopting Centralized supervision model (CSGM). The findings also show that IBs in jurisdictions adopting Reactive regulatory model report the worst performance in comparison with the other models (Passive, Pro-active, Interventionist and Minimalist).

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Risk management and corporate governance failures in Islamic banks: a case study

Journal of Islamic Accounting and Business Research ◽

10.1108/jiabr-03-2020-0064 ◽

2020 ◽

Vol 11 (9) ◽

pp. 1921-1939 ◽

Cited By ~ 2

Author(s):

Salah Alhammadi ◽

Simon Archer ◽

Mehmet Asutay

Keyword(s):

Risk Management ◽

Corporate Governance ◽

Business Model ◽

Financial Institutions ◽

Islamic Banking ◽

Islamic Banks ◽

Content Type ◽

Banking And Finance ◽

Ongoing Evaluation

Purpose The purpose of this paper is to show how the choice and ongoing evaluation of a firm’s business model, as a matter of strategic guidance, are key aspects of corporate governance (CG), with particular reference to risk management (RM) in Islamic banks. Design/methodology/approach This research uses a case study approach, with a single case, which was chosen as it fits very well the purpose of this research. The data collection was based largely on documentary evidence. Company data were collected from company annual reports, press releases and legitimate web sites. The ORBIS Bank Focus database was also used to produce a comparative financial analysis. Findings The study findings illustrate how an apparently successful business model may fail due to an inherent instability that could have been identified through the application of careful risk analysis (including stress testing) in the choice and ongoing evaluation of the business model, which robust CG and strategic guidance require. In particular, Arcapita’s problems illustrate the dangers to Islamic financial institutions (IFI) from business models that involve undue exposure to liquidity risk. Practical implications The issues raised in the paper are important in that Islamic banking and finance is an integral part of the global banking and finance industry. Investors and regulators are now requesting corporate management to provide improved service to shareholders and other stakeholders alike. IFI rely on the confidence of investors and market participants, just like conventional institutions and when this confidence erodes, it may prove difficult to regain. Social implications The global credit crisis of 2008 caused significant difficulties to firms, especially financial institutions, even with substantial government intervention in the economy, which raised some issues of CG and ethics. Originality/value This paper extends the knowledge of the potential effects of weaknesses in CG and RM, with specific reference to strategic guidance in the choice and ongoing evaluation of a firm’s business model, especially in relation to the Islamic banking sector. It also provides a telling illustration of the need for the enhancements of the Basel Committee’s prudential requirements set out in the various Basel III documents.

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