scholarly journals WHY DOES BANGLADESH REQUIRE A CENTRALIZED SHARIAH GOVERNANCE FRAMEWORK FOR ISLAMIC BANKS?

2022 ◽  
Vol 7 (1) ◽  
pp. 24-42
Author(s):  
Md. Kausar Alam ◽  
Oli Ahad Thakur
Keyword(s):  
Central Bank ◽  
Banking Industry ◽  
Monitoring Systems ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Governance Framework ◽  
Governance Practices ◽  
Supervisory Boards ◽  
Shariah Governance ◽  
Regulatory Challenges

The main objective of this article is to describe the logical reasons why a Centralized Shariah Governance Framework (CSGF) provided by the Central Bank of Bangladesh (Bangladesh Bank) is essential for the country’s Islamic banks. In doing so, it identifies the major regulatory challenges (self-developed and disparate use of Shariah Governance (SG) practices) faced by Islamic banks in Bangladesh. It considers an analytical approach to explore the significance of a CSGF for Islamic banks in Bangladesh and examines the current diversified procedures of SG practices. This article reveals that the self-developed SG practices of Islamic banks in Bangladesh have created confusion and pessimism among the practitioners, bankers and even to the general people and regulators which is negatively affecting the overall image of Islamic banks. Such incongruent governance practices have led to inconsistencies in SG structures, implementation procedures, monitoring activities. In addition, this article reveals that these deficiencies usually exist due to weak monitoring systems of the Central Bank, ineffective functioning of individual Shariah Supervisory Boards (SSB) and the absence of comprehensive SGF. The article argues that the Central Bank of Bangladesh should initiate to reform its Islamic banking industry by introducing a CSGF aimed to identify the roles, responsibilities, powers, and functions of SSB; thereby improving governance, accountability, and overall Shariah compliance quality. This article is hoped to be beneficial for the regulators and practitioners to consider revising current practices.   Keywords: Centralization, Bangladesh Bank, Islamic banks, Shariah governance framework.   Cite as: Alam, M. K., & Thakur, O. A. (2022). Why does Bangladesh require a centralized Shariah governance framework for Islamic banks?  Journal of Nusantara Studies, 7(1), 24-42. http://dx.doi.org/10.24200/jonus.vol7iss1pp24-42

Islamic Banking in Malaysia†

2012 ◽  
Vol 40 (1-2) ◽  
pp. 191-201 ◽  
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.

scholarly journals The Role of Shariah Board in Islamic Banks: Pakistan’s Perspective

2017 ◽  
Vol II (I) ◽  
pp. 356-363
Author(s):  
Muhammad Mushtaq Ahmed ◽  
Zia Uddin ◽  
Muhammad Iqbal
Keyword(s):  
Banking Industry ◽  
Board Members ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Governance Framework ◽  
Advisory System ◽  
Effective Role ◽  
Shariah Governance ◽  
The Individual

The State Bank of Pakistan introduced diversion from the individual Shariah advisory system to the Shariah board mechanism by issuing the Shariah governance framework in 2016 by making it mandatory for the Islamic banks to have an independent Shariah board. In this paper, it is examined whether the Shariah boards have any effective role in the improvement of the Shariah compliance environment of the banks or not? And how to make it more effective for the betterment of the Islamic banking industry? A questionnaire has been developed to study and inspect these issues. The results indicate that even though the role of sharia board could not be denied in the improvement of Shariah compliance in IBIs, however, the mechanism may be further strengthened. The study also suggests that Shariah board members should be involved regularly by making it obligatory on the IBIs to arrange frequent meetings of the board.

scholarly journals The Role of Shariah Auditor in Islamic Banks: The Effect of Shariah Governance Framework (SGF) 2011

2020 ◽  
Vol 11 (4) ◽  
pp. 443
Author(s):  
Mohd Rushdan Yasoa' ◽  
Wan Amalina Wan Abdullah ◽  
Wan Anisah Endut
Keyword(s):  
Internal Control ◽  
Banking Industry ◽  
Internal Audit ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Governance Framework ◽  
Roles And Responsibilities ◽  
Compliance Audit ◽  
Third Line ◽  
Shariah Governance

This paper ascertains the current roles and responsibilities of Shariah auditor in the Islamic banking industry in Malaysia. To explore further, we identify the changes in these roles, especially after the introduction of the Shariah Governance Framework (SGF) 2011. The study employs a qualitative method by utilizing in-depth interviews with nine (9) key individuals in Malaysian Islamic banks. Our findings support the notion that Shariah auditors' roles and responsibilities are still under the jurisdiction of the banks' internal audit unit. More importantly, Shariah auditors play their roles as the third line of defense by giving assurance to the shareholders and stakeholders that all businesses and operations comply with Shariah precepts. Also, Shariah auditors need to look at the internal control elements of whether effective and efficient enough to alleviate any possible Shariah breaches. In terms of changes in its roles after the SGF implementation, most of the interviewees assert that the approach has been changed from compliance audit to risk-based audit. Our findings guide us to propose more structured and specific guidelines about Shariah auditors' roles and responsibilities in the Islamic banks. This guideline eventually could provide stimulus to improve governance and strengthen market as well as stakeholder's confidence. Finally, this study stipulates some precious recommendations to further enhance the Shariah auditor roles not only in the Malaysian Islamic banking industry but also in similar contexts.

A proposed centralized Shariah governance framework for Islamic banks in Bangladesh

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Md. Kausar Alam
Keyword(s):  
Central Bank ◽  
Supervisory Board ◽  
Islamic Banks ◽  
Structured Interviews ◽  
Content Type ◽  
Governance Framework ◽  
Rating Agencies ◽  
Study Approach ◽  
Supervisory Boards ◽  
Shariah Governance

Purpose The purpose of this study is to propose a centralized Shariah governance framework (CSGF) for the Islamic banks and Shariah governance in Bangladesh as such, the existence and practices of the Shariah governance framework (SGF) are decentralized and diversified. Design/methodology/approach The paper implements a qualitative case study approach to develop a CSGF for the Islamic banks in Bangladesh. The data has been collected from 17 respondents through semi-structured interviews with a combination of regulators, Shariah supervisory board members, Shariah department executives and Shariah experts from the central bank and Islamic banks in Bangladesh. Findings This study proposes a CSGF which is comprising two-tier Shariah supervisory boards (SSBs), i.e. institutional SSB and centralized Shariah supervisory board (CSSB) under the central bank to monitor the overall functions of SG. The study recommends the setting up of four departments under the central bank to enhance the functions of CSSB. Besides, the central bank can introduce Shariah rating, external Shariah audit and external Shariah review through Islamic rating agencies and Islamic Chartered Accountant Firms for transparency and quality compliance which are more desired from the public and other stakeholders. Research limitations/implications The study significantly contributed to the national and global regulatory bodies by providing a structural CSGF for the Islamic banks to perform their functions and activities smoothly. Practical implications The study outlines a CSGF for the Islamic banks in Bangladesh as the existing practices are diversified and decentralized. Therefore, this framework would be helpful for the central bank and Islamic banks in Bangladesh to promote unique practices of the SGF. Originality/value This is the first research that provides a structure of CSGF for Islamic banks in Bangladesh, while the central bank of Malaysia developed the first SGF. There is no study concerning the demographic figure of CSGF of Islamic banks in the entire literature.

scholarly journals Perceptions on Shariah Governance Framework of Islamic Banking In Oman: Issues and Challenges

2020 ◽  
Author(s):  
International Journal of Fiqh and Usul al-Fiqh Studies
Keyword(s):  
Current Practice ◽  
Banking Industry ◽  
Secondary Data ◽  
Structured Interview ◽  
Islamic Banking ◽  
Governance Framework ◽  
Banking And Finance ◽  
Descriptive Research ◽  
Governance Practices ◽  
Shariah Governance

Oman has adopted the Sharī’ah governance framework which is very similar to other countries that face issues of Sharī’ah governance such as independence, competency, and disclosure. Therefore, this study will examine these main issues in the Sharī’ah governance framework of Oman. This paper aims to examine the current practice of Sharī’ah governance in Oman from the perspectives of Sharī’ah advisors, bankers and regulators. The paper focuses on the present practice of Sharī’ah governance framework and related issues such as independence, competency, and disclosure. The paper uses the descriptive research method in terms of collecting secondary data and information for the literature review. Since the availability of data and information on Sharī’ah governance practices in Oman is very limited, a semi-structured interview was conducted with Sharī’ah advisors, officers and regulators to explore their perceptions on Sharī’ah governance and related issues. The findings of the paper reveal that the regulators have put in place an excellent Sharī’ah governance framework and it may be considered as one of the best frameworks in the Islamic banking industry. However, there are shortcomings and weaknesses in the current practice of Sharī’ah governance frameworks, such as lack of experience, lack of research in the field of Islamic banking and finance and low position of internal Sharī’ah review. This study provides and proposes some recommendations for enhancing the present Sharī’ah governance framework.

External Shariah Audit Services from Practitioners’ Views: The Case of Malaysian Islamic Banks

2021 ◽  
Vol 6 (3) ◽  
pp. 144-153
Author(s):  
M R Yasoa ◽  
S F Muhamad ◽  
T Abdullah ◽  
M N H Yusoff ◽  
N M Said ◽  
...  
Keyword(s):  
Qualitative Method ◽  
Banking Industry ◽  
Jel Classification ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Structured Interviews ◽  
Confidential Information ◽  
Reputational Risk ◽  
Shariah Governance ◽  
Key Industry

Objective – This paper investigates the possibility and feasibility of Malaysia's Islamic banking industry hiring external Shariah audit (ESA) services in the audit fraternity as one of the Shariah governance mechanisms. Some of the scholars argued that ESA is more independent and is able to strengthen the existing Shariah compliance in the industry. Methodology – This study employs a qualitative method by utilising semi-structured interviews with nine key industry players: Shariah auditors, Heads of Shariah audit, Shariah Committee (SC) Member, and Chief Shariah Officer. Data gathered from the interviews was transcribed and analysed using Atlas.ti software. Findings– A series of interviews reveal that given the current practices by the Islamic banking industry, it could be inferred that the Malaysian Islamic banking industry is not ready to exercise the ESA practices. This unreadiness is due to several factors, such as ESA costs outweighing its benefits, the fear of reputational risk, and anxiety of leaking confidential information to rivals. Novelty – The Shariah audit research especially relates to external Shariah audit is considered limited. Type of Paper: Empirical JEL Classification: E44, G10, G20. Keywords: External Shariah audit; Islamic Banks; qualitative method; Shariah governance; Malaysia

scholarly journals Shari’ah Governance of Islamic Non-Banking Financial Institutions in Malaysia: A Conceptual Review

2021 ◽  
Vol 2 (1) ◽  
pp. 70-77
Author(s):  
Azmir Ahmad ◽  
Muhammad Shahrul Ifwat Ishak
Keyword(s):  
Financial Institutions ◽  
Banking Industry ◽  
Regulatory Framework ◽  
Islamic Banking ◽  
Governance Framework ◽  
Library Research ◽  
Governance Practices ◽  
Banking Institutions

It is widely recognized that Malaysia is among the leading countries in the Islamic banking industry. This is due to its comprehensive regulatory framework from the Shari’ah aspects, particularly Shari’ah governance. Bank Negara Malaysia (BNM), as the regulator, is closely monitoring all players in this industry so that they can follow all its policies and regulations closely. Nevertheless, the Islamic Non-Banking Institutions (NBFIs), seem to be contrary in this aspect. In fact, it is not compulsory for the NBFIs to adhere to the BNM’s policies, particularly regarding the Shari’ah governance framework. Therefore, this study aims to explore Shari’ah governance practices among selected Islamic NBFIs in Malaysia. Since this study is a conceptual review, it adopts library research to achieve its objective. The finding reveals that there are different practices of Shari’ah governance among the Islamic NBFIs due to different sizes of their institutions and the complexity of their products. While the flexibility may bring benefits for the NBFIs, their respective regulators should enhance the Shari’ah governance aspects by providing a comprehensive policy as well as improving its enforcement particularly from the check and balance perspective. Also, the study suggests that the Islamic NBFIs should establish an association among its members to promote coordination, strengthen the governance, and exchange views, particularly on Shari’ah aspects.

scholarly journals SHARIAH GOVERNANCE DAN KUALITAS TATA KELOLA PERBANKAN SYARIAH

2015 ◽  
Vol 4 (2) ◽  
Author(s):  
Ali Rama ◽  
Yella Novela
Keyword(s):  
Corporate Governance ◽  
Unique Feature ◽  
Board Members ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Board Meeting ◽  
Governance System ◽  
Governance Practices ◽  
Shariah Governance

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

scholarly journals A Quantitative Study of the Role Shariah Boards and Bank Ownership Structures Play in Enhancing the Financial Performance of Islamic Banks: A Case of Pakistan

ICR Journal ◽  
2020 ◽  
Vol 11 (2) ◽  
pp. 204-224
Author(s):  
Qaiser Abbas ◽  
Sheila Ainon Yussof ◽  
Muhammad Naeem Anjum
Keyword(s):  
Financial Performance ◽  
Supervisory Board ◽  
Islamic Banking ◽  
Central Feature ◽  
Islamic Banks ◽  
Membership Change ◽  
Supervisory Boards ◽  
Banking Institutions ◽  
Shariah Governance

Shariah governance is a central feature and the second layer of corporate governance for Islamic banks (IBs) and Islamic financial institutions (IFIs). Shariah governance is unique to IBs and IFIs due to their possession of Shariah Supervisory Boards (SSB). SSBs serve to ensure that the management of Islamic banking institutions complies with shariah principles. Shariah governance is not only designed to raise the confidence of investors and the public in terms of authenticity and compliance to Islamic banking practices, but also to minimise the fiduciary and reputational risks of Islamic banking institutions. Due to the importance of shariah governance and the role of SSBs in IBs, this research investigates the role of SSBs in influencing the financial performance of IBs with the moderation role of ownership structure in Pakistan. By using nine years of data (2009-2017) pertaining to three Islamic banks in Pakistan, we found that shariah supervisory board reputations, expertise, cross membership, change in composition, shariah qualification, and ownership have significant moderation relationships with the financial performance of IBs. This study is an attempt to provide a deeper understanding of the role of owners and Shariah Supervisory Boards in enhancing the financial performance of Islamic banks for both researchers and policymakers.

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)

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.

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