Compliance in the Islamic financial institutions and its relationship with the risks

2020 ◽  
Vol 9 (1) ◽  
pp. 1
Author(s):  
A'sem Sami Ehmoud AL Fukaha
Keyword(s):  
Drug Abuse ◽  
Money Laundering ◽  
Financial Institutions ◽  
Islamic Banks ◽  
Islamic Financial Institutions

This research deals with two components. The first component addresses the clarification of the compliance in the Islamic financial institutions and the statement of its legitimacy and how important it is to the Islamic banks. The concept of non-compliance risk with its forensic types, its role and relationship to the dangerous effects of drug abuse, and the reputation of the bank and its relationship towards fighting against money laundering in Islamic banks. The regulators need to achieve legitimate compliance in accordance to its requirements of the implementation in the Islamic banks (Islamic Sharia). The research also shows the extent of the need for these regulators to achieve compliance with their legitimate oversight to avoid any risks that might cause it.

scholarly journals Collecting Fees for Safekeeping of Collateral: Rules and Applications in the Contemporary Islamic Financial Institutions

2020 ◽  
Vol 9 (1) ◽  
pp. 50-53
Keyword(s):  
Financial Institutions ◽  
Islamic Law ◽  
Market Price ◽  
Point Of View ◽  
Actual Cost ◽  
Islamic Banks ◽  
Maturity Date ◽  
Islamic Financial Institutions

The study aims to examine the Shari’ah legality of whether pledgor or pledgee should take care of collateral (marhun) during the period of the loan. Moreover, the study seeks to provide possible applications for the pledge (rahn) and clarify Shari’ah rules for each application. Malaysian Islamic banks apply pledge products by offering loans (qardh hasan) to the customers and requesting gold assets as collateral against a loan. The banks charge safekeeping fees to keep the gold until the maturity date of the loan. This practice combines loan and sale contracts in a single transaction. Accordingly, the study seeks to evaluate this practice from an Islamic point of view. Islamic law categorizes loans under charity contracts while the sale is categorized under contracts of exchange (mu’awadhat). The nature of the two contracts is different. Therefore, the study examines categories that combine loans and contracts of exchange in one transaction. The results reveal that it is not permissible for the pledgee to charge fees higher than market fees for the keeping of collateral. Charging fees that are higher than the market price is considered riba. According to Shari’ah rules, any kind of benefit derived from a loan is riba and thus it is prohibited. However, charging fees that are comparable to the market price and cover the actual cost for safekeeping of collateral is permissible. According to Islamic Fiqh Academy resolutions and AAOIFI standards, Islamic banks may charge fees for safekeeping of gold collateral considering that fees should be to the market fees and should only cover actual expenses.

scholarly journals AKAD MURĀBAḤAH; KONSEP DAN PELAKSANAAN DI LEMBAGA KEUANGAN ISLAM MODERN

2020 ◽  
Vol 1 (1) ◽  
pp. 88-102
Author(s):  
Ahmad Maulidizen
Keyword(s):  
Financial Institutions ◽  
Islamic Banks ◽  
Purchase Price ◽  
Short Term ◽  
Significant Growth ◽  
Library Research ◽  
Islamic Financial Institutions ◽  
The Cost ◽  
Number Of Customers ◽  
Risk Dependency

ABSTRACTIslamic banking in Indonesia has experienced significant growth, including assets, financing providedand the number of customers. Murābaḥah is the sale and purchase of goods at the original price with theagreed-upon profit. In murābaḥah the seller must tell the cost of the product he buys and determine anadditional level of profit. This research is a library research about the murābaḥah contract according tomuamalah fiqh and its application in modern Islamic financial institutions. Methods of collecting data indocumentation and various sources related to the murābaḥah contract are then analyzed inductively anddeductively. The results of the study are the murābaḥah foundation is the principle of buying and sellingwith a deferred payment system. Murābaḥah, as used in Sharia banking, is based on two main elements,namely the purchase price and related costs, and the agreement on mark-up (profit). Islamic banks adoptmurābaḥah to provide short-term financing to customers for the purchase of goods even though thecustomer does not have the money to pay. The murābaḥah financing portfolio in Islamic banks reaches 70-80%, but in practice there have never been any problems, including; collateral which is a problem of fiqh,risk dependency as a problem of the bank, bankruptcy and delay in payment are the problems of customers,and profits are too high, namely the problem of coming from the community. Therefore, Islamic banks mustmake improvements in the implementation to be in accordance with Sharia.Keyword : Murābaḥah, Financing Instruments, Modern Islamic Financing

Sharia Compliant in Private Zakat Institutions of Riau

2020 ◽  
pp. 429-442
Author(s):  
Devi Megawati
Keyword(s):  
Financial Institutions ◽  
Supervisory Board ◽  
The Body ◽  
Islamic Banks ◽  
Body Of Knowledge ◽  
Islamic Financial Institutions ◽  
Primary Reference

This study aims to understand the role of Sharia Supervisors in the private Zakat Institution (LAZ) as well as other aspects of sharia compliance, such as Zakat fatwa on the perspective of Zakat officers. According to Decree of the Minister of Religion Number 333 / 2015 that LAZ as register must have a sharia supervisor. Sharia compliance of an institution could rely on the role of the sharia supervisory board (SSB). Some literature discussing this topic is still dominated study on Islamic financial institutions (IFIs), especially in Islamic Banks. Therefore this article will contribute to the body of knowledge, especially in the zakat literature. Data were gathered from five presiding officers of private zakat institutions in one province in Indonesia which consists of three presiding officers from provincial LAZ representative and two presiding officers from LAZ district. The study found that Sharia compliance in LAZ had many weaknesses such as lack of sharia control by sharia supervisors, a member of the sharia supervisory board who does not follow the latest issues about Zakat or the absence of competency requirements to be a sharia supervisor at LAZ and also did not make Zakat fatwa issued by MUI as the primary reference by zakat officer. This information will be useful for stakeholders, including supervisory authorities and regulators.

scholarly journals Drivers of Ar-Rahnu (pawn) acceptance: Malaysian evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hassanudin Mohd Thas Thaker ◽  
Ahmad Khaliq ◽  
Mohamed Asmy Bin Mohd Thas Thaker ◽  
Anwar Bin Allah Pitchay ◽  
K. Chandra Sakaran
Keyword(s):  
Financial Institutions ◽  
Perceived Risk ◽  
Credit Card ◽  
Social Factor ◽  
Partial Least Square ◽  
The Body ◽  
Least Square ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Financial Institutions

Purpose The purpose of this paper is to examine the factor persuading the acceptance of Islamic pawn broking (Ar-Rahnu) among Islamic bank customers. Design/methodology/approach The authors collected the data using a self-administered questionnaire design and analysed using SPSS Statistics and smart partial least square. The study is restricted to only respondents who are based in the area of Klang Valley (Selangor and Kuala Lumpur), as these two areas have a larger number of Islamic banks and a decent number of Islamic banks’ clients. A total of 381 respondents’ responses are used for this study, and the constructs involved for analysis purpose are affect, social factor, facilitating conditions, perceived financial benefits and perceived risk constructs. Findings The finding suggests a significant positive association for social factor and perceived risk, while negative association learnt for affect on acceptance of Ar-Rahnu financing. On the same note, the facilitating condition and perceived financial benefit are found insignificantly related. Practical implications The findings generated from this study are expected to enrich the literature on the body of knowledge, as it has served to broaden the understanding of the Ar-Rahnu acceptance level in Malaysia. As mentioned, there is limited literature available using this type of financing. Existing studies focus too much on conventional financing products such as personal financing, credit card, short-term loan and many others. Less attention is given to Ar-Rahnu financing. Thus, this study expected to add value to the literature available in the context of Islamic pawn broking business. Moreover, the findings of this study will be very helpful for the Islamic financial institutions to find the best way to retain Ar-Rahnu clients and encourage more client to choose Ar-Rahnu as a mode of financing. Originality/value This study owns greater potential to assist Islamic financial institutions to discover the best techniques to retain and encourage the grander number of clients for Ar-Rahnu as a mode of financing.

Corporate governance and compliance with AAOIFI governance standards by Islamic banks

2020 ◽  
Vol 13 (5) ◽  
pp. 891-918
Author(s):  
Yosra Mnif ◽  
Marwa Tahari
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Audit Committee ◽  
Annual Reports ◽  
Islamic Banks ◽  
Content Type ◽  
Disclosure Requirements ◽  
Financial Expertise ◽  
Islamic Financial Institutions ◽  
Research Stage

Purpose This study aims to examine the effect of the main corporate governance characteristics on compliance with accounting and auditing organisation for Islamic financial institutions’ (AAOIFI) governance standards’ (GSs) disclosure requirements by Islamic banks (IB) that adopt AAOIFIs’ standards in Bahrain, Qatar, Jordan, Oman, Syria, Sudan, Palestine and Yemen. Design/methodology/approach The sample consists of 486 bank-year observations from 2009 to 2017. Findings The findings reveal that compliance with AAOIFIs’ GSs’ disclosure requirements is positively influenced by the audit committee (AC) independence, AC’s accounting and financial expertise and industry expertise, auditor industry specialisation, IB’s size and IB’s listing status. On the other hand, it is negatively influenced by the ownership concentration. Research limitations/implications This study has only examined compliance with AAOIFI’s GSs’ disclosure requirements and has focussed on one major sector of the Islamic financial institutions (which is IB). Practical implications The findings are useful for various groups of preparers and users of IBs’ annual reports such as academics and researchers, accountants, management of IBs and some organisations. Originality/value While the study of the AAOIFIs’ standards has grown contemporary with considerable contributions from scholars, however, the majority of these studies are descriptive in nature. Indeed, the existing literature that has explored the determinants of compliance with AAOIFI’s standards is in the early research stage. To the best of the knowledge, there is a paucity of empirical research testing this issue.

scholarly journals The Regulation of Islamic Finance in the United Kingdom

2010 ◽  
Vol 13 (1) ◽  
pp. 69-77 ◽  
Author(s):  
Jonathan Ercanbrack
Keyword(s):  
United Kingdom ◽  
Financial Institutions ◽  
Islamic Finance ◽  
Islamic Banks ◽  
Financial Industry ◽  
Religious Dimension ◽  
The United Kingdom ◽  
Islamic Financial Institutions

This article examines the unique risks associated with Islamic financial institutions and the secular state's reticence to directly regulate their religious dimension. It argues that the state's method of regulating the Islamic financial industry ignores special reputational risks associated with the religious and cultural distinctiveness of Islamic banks.

scholarly journals A SUCCINCT ANALYSIS OF MITIGATING LIQUIDITY RISK IN ISLAMIC BANKS IN THE LIGHT OF LIQUIDITY AND RISK MANAGEMENT PRINCIPLES

2019 ◽  
Vol 4 (1) ◽  
pp. 527
Author(s):  
Atharyanshah Puneri ◽  
Naeem Suleman Dhiraj ◽  
Hafiz Benraheem
Keyword(s):  
Risk Management ◽  
Financial Institutions ◽  
Financial Institution ◽  
Real Life ◽  
Liquidity Risk ◽  
Islamic Banks ◽  
Liquidity Management ◽  
Islamic Financial Institutions ◽  
The Subject ◽  
Key Aspects

Liquidity management has been incessantly challenging for the financialinstitutions and especially Islamic financial institutions due to their nature of business. The�convoluted nature of liquidity management impedes the task of Islamic banks in managing�their liquidity efficiently. Given the intricacies of the subject matter, this paper delves into�elaborating the key aspects of liquidity management; subsequently, discusses the�consequences of poor liquidity management and problems inherent in managing the latter by�analyzing the real-life failure of Islamic financial institution as a result identifying the issues that could possibly jeopardize the existence of the Islamic banks. Finally, equipping the�readers with tools to mitigate the liquidity risk.

scholarly journals AN EXAMINATIONS OF ALLEGATION OF NON-COMPLIANCE WITH AML/CFT LAWS AGAINST ISLAMIC BANKING

Jurnal Akta ◽  
2021 ◽  
Vol 8 (2) ◽  
pp. 76
Author(s):  
Maruf Adeniyi Nasir ◽  
Dato� Ng See Teong
Keyword(s):  
Money Laundering ◽  
Focal Point ◽  
The United States ◽  
Islamic Banks ◽  
Weak Supervision ◽  
Western Countries ◽  
The Us ◽  
Islamic Financial Institutions ◽  
Terrorism Financing ◽  
To Come

The dangerous dimension which the terrorism financing incursion introduced to peace and harmonious life globally makes the issue of money laundering and combatting financing terrorism (AML/CFT) a serious phenomenon. The compliance with the AML/CFT laws now generates global interest. Assessment of whether Islamic banks are complying with AML/CFT compliance measures becomes a grave issue that require attention particularly against the background of allegation by Western countries of lax control and supervision. This is probably because of the havoc that the world has continuously experienced as a result of this menace. The issue has continued to come in different dimensions and like a Siamese twin, the banks have become the focal point and inseparable in the issue of how to combat this menace. Incidentally, the increase in the growth and development of Islamic banks across the globe has dragged it to the centre of discussion. Thus, there have being a recurring issue on Islamic financial institutions regarding its compliance with Anti-money laundering laws and Combating Financing Terrorism (AML/CFT) measures. There were allegations of non-compliance with AMLCFT laws by Islamic banks, particularly by some Western countries led by the United States of America. Consequently,� the issue of combatting money laundering and terrorism has become a major issue in the global domain. This paper has extensively examined the allegation of non-compliance of Islamic banks with AML/ CFT laws. This is done by beaming searching light on the growing perception of lax in the control, monitoring, weak supervision, and non-compliance of Islamic banks with AML/CFT measures that is been spearheaded by some western countries, led by the US. Thus, by using the doctrinal research methodology, the paper sought to determine the veracity of the allegation and incidentally found that the allegation is not only baseless but lacks empirical evidence.�

scholarly journals Upaya Fintech Syariah Mendorong Akselerasi Pertumbuhan UMKM di Indonesia

2021 ◽  
Vol 7 (1) ◽  
pp. 41
Author(s):  
Saripudin Saripudin ◽  
Prameswara Samofa Nadya ◽  
Muhammad Iqbal
Keyword(s):  
Civil Society ◽  
Human Resources ◽  
Financial Institutions ◽  
Swot Analysis ◽  
Islamic Banks ◽  
Managerial Skills ◽  
Islamic Financial Institutions

Compared to other Islamic financial institutions, Islamic Fintech has some advantages in accelerating the growth of SME Enterprises in Indonesia. Nevertheless, the existence of Islamic Fintech is not free from various problems, such as regulation aspect, human resources aspect, also perception of society and potential fraud. This research sought to find solution of the problems with SWOT analysis, then comparing the aspects each other to find out strategies in the effort of growing Islamic fintech for accelerating SME Enterprises. The results are some strategies consisting of, first, ecosystem strengthening between Islamic Fintech, government, academics and civil society, including Islamic Fintech customers and Islamic Banks. Second, optimalization potential of Islamic Fintech in managerial skills also Islamic contracts capacity. Last, massive and targeted socialization and promotion of Islamic Fintech.

scholarly journals Al-Mashaqqah Tajlib Al-Tays¬ir Makna Dan Implikasinya Dalam Pengembangan Ekonomi Islam

2018 ◽  
Vol 3 (2) ◽  
Author(s):  
M. Dliyaul Muflihin
Keyword(s):  
Economic Development ◽  
Financial Institutions ◽  
Islamic Law ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Equal Distribution ◽  
The Public ◽  
Islamic Financial Institutions ◽  
Islamic Economic

The problem of Islamic economics is also increasingly complex with the large number of banks. To meet the needs of transactions, banks have products that are offered to the public. In accordance with the function of the bank, namely collecting and distributing funds to the public. The purpose of channeling funds by Islamic banks is to support the implementation of development, improve justice, togetherness and equal distribution of people's welfare. This paper will answer what is the meaning of al-mashaqqah tajlib al-taysir and how do the Implications of al-mashaqqah tajlib al-taysir in the development of Islamic economy? The result of research shows that the meaning of the rule of al-mashaqqah tajlib al-taysir is the difficulty of bringing convenience. The point is that if implementing a provision of shara' mukallaf faces obstacles in the form of difficulties and limitations that exceed the limits of reasonable capabilities, then the difficulty automatically creates relief provisions. In other words, if we find difficulty in carrying out something that is to be sharia, then the difficulty becomes a justifiable cause to facilitate in carrying out something that is to be provision of sharia, so that we can continue to run the sharia of Allah easily. The implications raised by the rules of al-mashaqqah tajlib al-taysir are the determination of the law of Islamic financial institutions. This impact is seen when Islamic law allows transactions in Islamic banking financial institutions, so that the community will easily meet the needs by transacting with Islamic banking through contracts that have been agreed upon. Keywords: al-Mashaqqah Tajlib al-Taysir, Islamic Economic Development

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