scholarly journals Islamic Finance in The Digital World: Opportunities and Challenges (Kewangan Islam dalam Dunia Digital: Peluang dan Cabaran)

2019 ◽  
Vol 16 (3) ◽  
pp. 283-299
Author(s):  
Mohamad Akram Laldin ◽  
Fares Djafri
Keyword(s):  
Secondary Data ◽  
Inductive Method ◽  
Islamic Finance ◽  
Financial Industry ◽  
Finance Industry ◽  
Left Behind ◽  
Digital World ◽  
Innovation And Technology ◽  
Shariah Governance ◽  
The Relationship

Islamic finance has grown considerably over the last four decades and has a global reach. It is considered one of the fastest-growing segments of the global financial industry. One of the biggest challenges for Islamic finance in the next decade is on financial technology (Known as Fintech). In the digital world, traditional financial practice will be left behind. This paper examines the phenomenon of financial innovation and technology in Islamic finance. The research adopts a qualitative approach employing the inductive method to trace primary and secondary data on the topic and the descriptive method to describe the emergence of fintech in the Islamic finance industry. The study found that all financial innovations are generally welcomed and can be considered as benefits (Maslahah) to the customers and to the whole financial industry. Innovations in fintech become impermissible only if there is clear evidence from the Shariah that they are against the basic rules of the Shariah. The study also highlights the relationship between fintech and Shariah compliance and suggested to have a proper Shariah governance framework in order to ensure the operation of fintech is in total compliance with Shariah. Besides that, authorities and regulators are required to develop Shariah standards that would explicitly spell out the requirement of Shariah that are fundamental to fintech operations and practices. Keywords: Innovation, Fintech, Digital World, Shariah Compliance, Islamic Finance. Abstrak Kewangan Islam telah berkembang dengan pesat sejak empat dekad yang lalu dan telah menjangkau capaian global. Ia merupakan salah satu segmen dalam industri kewangan global yang paling pantas berkembang. Salah satu cabaran terbesar bagi kewangan Islam sepuluh tahun akan datang adalah teknologi kewangan (dikenali sebagai Fintech). Pada era digital, amalan kewangan yang tradisional tidak akan lagi diguna pakai. Kajian ini menyelidik fenomena yang tercetus daripada inovasi kewangan dan teknologi dalam kewangan Islam serta parameter Syariah yang berkaitan. Pendekatan yang digunakan dalam penyelidikan ini bersifat kualitatif dengan mengaplikasi dua kaedah. Kaedah yang pertama ialah kaedah induktif yang digunakan untuk mengesan data primer dan sekunder yang berkaitan dengan topik dan kaedah kedua ialah kaedah deskriptif bagi menggambarkan kehadiran Fintech dalam industri kewangan Islam. Hasil kajian mendapati bahawa inovasi kewangan pada umumnya adalah digalakkan dan merupakan suatu maslahat kepada para pelanggan dan kepada keseluruhan industri kewangan. Hukum inovasi atau penciptaan sesuatu yang baru dalam Fintech akan berubah menjadi haram hanya apabila terdapat bukti jelas daripada Syariah yang menunjukkan ianya bertentangan dengan peraturan asas Shariah. Kajian ini juga mempamerkan hubungan antara Fintech dan pematuhan Syariah dan mencadangkan agar sebuah rangka kerja tadbir urus Syariah dibentuk bagi memastikan operasi Fintech adalah sepenuhnya mematuhi Syariah. Di samping itu, pihak berkuasa dan pentadbir disarankan agar mewujudkan satu piawaian Syariah yang menggariskan syarat-syarat penting dalam aspek pengoperasian dan amalan Fintech. Kata kunci: Inovasi, Fintech, Dunia Digital, Pematuhan Syariah, Kewangan Islam.

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

2015 ◽  
Vol 23 (2) ◽  
pp. 135-160 ◽  
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.

scholarly journals EFFECTIVE CRISIS MANAGEMENT FOR ISLAMIC FINANCIAL INDUSTRY AND THE INSTITUTION OF HISBAH: LESSONS FROM GLOBAL FINANCIAL CRISIS

2016 ◽  
Vol 5 (1) ◽  
Author(s):  
Najeeb Zada ◽  
Ahcene Lahsasna ◽  
Muhammad Yusuf Saleem
Keyword(s):  
Financial Crisis ◽  
Moral Hazard ◽  
Crisis Management ◽  
Deposit Insurance ◽  
Global Financial Crisis ◽  
Financial Institution ◽  
Islamic Finance ◽  
Financial Industry ◽  
Finance Industry ◽  
The Global Financial Crisis

The recent financial crisis resulted destructive effects on finance industry. Islamic financial industry (IFI) is still naïve and largely untested in the face of a major financial turmoil. Major issues and uncertainties of the insolvency of IFI include the issue of moral hazard, government bailouts, excessive risk taking and deposit insurance. This paper addresses the issue of crisis management in IFI from the perspective of al-Siyasah al-Shar’iyyah and attempts to derive public policy guidelines that are useful in developing a timely and efficient crises management framework for Islamic finance industry. By using qualitative methods, the study found that the global financial crisis resulted in great destruction of financial institution. Although Islamic finance was quite immune to the global crisis as compared to its conventional peer, concerns still exist. It is time that Islamic finance industry learns from the financial woes of the rest of the world. =========================================== Krisis keuangan baru-baru ini mengakibatkan efek destruktif pada industri keuangan. Industri keuangan Islam (IKI) masih naif dan sebagian besar belum teruji dalam menghadapi gejolak keuangan besar. Isu utama dan ketidakpastian dari kebangkrutan IKI meliputi moral hazard, dana talangan pemerintah, pengambilan risiko yang berlebihan dan asuransi deposito. Makalah ini membahas isu manajemen krisis dalam IKI dari perspektif al-Siyasah al-Shar'iyyah dan berusaha mendapatkan pedoman kebijakan publik yang bermanfaat dalam mengembangkan kerangka kerja manajemen krisis yang tepat waktu dan efisien bagi IKI. Dengan menggunakan metode kualitatif, studi ini menemukan bahwa krisis keuangan global mengakibatkan kehancuran besar bagi industri keuangan. Meskipun keuangan Islam cukup kebal terhadap krisis global dibandingkan dengan keuangan konvensional, kekhawatiran masih ada. Sudah saatnya industri keuangan Islam belajar dari krisis keuangan dari seluruh dunia.

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.

scholarly journals Managing Shariah Non-Compliance Risk via Islamic Dispute Resolution

2019 ◽  
Vol 13 (1) ◽  
pp. 2 ◽  
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.

scholarly journals Islamic Financial Law and the Law of the United Arab Emirates: Disjuncture and the Necessity for Reform

2019 ◽  
Vol 33 (2) ◽  
pp. 152-178
Author(s):  
Jonathan George Ercanbrack
Keyword(s):  
United Arab Emirates ◽  
Islamic Finance ◽  
Legal Systems ◽  
Recent Event ◽  
Investor Confidence ◽  
Finance Industry ◽  
The Law ◽  
Relationship Of ◽  
The Relationship ◽  
Securities Laws

Abstract Islamic financial law (IFL), an emerging global legal order, is a highly fragmented law comprised of both state and non-state generated laws, standards, commercial practices, institutions, fatwās and legal ideas. A recent event involving ṣukūk issuance in which Dana Gas claimed that its ṣukūk were no longer Sharīʿah-compliant highlights the legal disjuncture between global IFL and the laws of municipal legal systems, which have chosen to facilitate and regulate Islamic finance. Systemic legal issues or ‘legal gaps’ undermine investor confidence and impede sustainable development of the Islamic finance industry. Legal gaps include but are not limited to undeveloped securities laws, enforceability issues and a lack of clarity with respect to the role and effect of the Sharīʿah in the municipal legal systems of many MENA (Middle East/North Africa) states. This paper analyses these gaps and in so doing illustrates the relationship of IFL to the law of the United Arab Emirates.

scholarly journals The internal challenges facing Islamic finance industry

2016 ◽  
Vol 9 (2) ◽  
pp. 222-235 ◽  
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.

scholarly journals Fifth Harvard University Forum Islamic Finance

2002 ◽  
Vol 19 (3) ◽  
pp. 156-162
Author(s):  
Zaid AJbarzinji
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Service Providers ◽  
Middle Eastern ◽  
Professor Emeritus ◽  
Islamic Finance ◽  
Development Bank ◽  
Financial Industry ◽  
Finance Industry ◽  
Past Experiences

Each year, the Harvard Islamic Finance Information Program (HIFIP) of the Center for Middle Eastern Studies organizes this forum. This year's forum had an international flavor, thanks to participants from Malaysia, South Africa, the Middle East, and Europe. Participants were mainly finance industry representatives from the Islamic Development Bank, the Kuwait Finance House, HSBC Amanah Finance, the Dow Jones Islamic Index, Bank Indonesia, Freddie Mac, and others. In addition, several experts in Islamic economics and finance, such as Monzer Kahf, M. Nejatullah Siddiqi, Nizam Yaquby, and Frank E. Vogel participated. Many other participants sought to educate themselves about the principles of Islamic finance and the availability of lslamically approved financial products. Overall, the forum was more of an opportunity for those interested in Islamic finance to meet each other, network, and present some of their latest lslamically approved financial instruments and contracts. The forum fea­tured a few research papers and many case studies. Most presentations and panel discussions focused on current and past experiences in the Islamic finance industry, challenges facing the development of new financial instru­ments, effective marketing and delivery of products to end-users, and areas where applying jjtihad is most needed and promising. Participants also dis­cussed the need to develop relevant financial institutions to strengthen the stability and perfonnance of Islamic financial service providers ( e.g., man­aging liquidity and risk). Thomas Mullins, HIFIP's executive director, welcomed the guests. He stressed the Islamic finance industry's important role in creating a dialogue between I slam and the West - a role made especially relevant after Septem­ber 11. Forum chairperson Samuel Hayes, Jacob Schiff Professor Emeritus at Harvard Business School, used his opening remarks to commend the industry on its many accomplishments during the past decade and outlined areas for improvement. In his introduction, Saif Shah Mohammed, presi­dent of the Harvard Islamic Society, suggested that the industry should prer vide relevant services to students, such as Shari'ah-compliant educational loans and young professional programs. Ahmad Mohamed Ali, president of the Islamic Development Bank (IDB), delivered the keynote address: "The Emerging Islamic Financial Architecture: The Way Ahead." He discussed the infrastructure required to strengthen the Islamic financial industry, which is in a process of evolution. Some recent major initiatives include the Accounting and Auditing Organ­ization for Islamic Financial Institutions, the Islamic Financial Services Organization, an international Islamic financial market with a liquidity management center, and an Islamic rating agency. Currently, there are ...

The Global Perspective of Islamic Finance and the Potential for China to Tap into the Islamic Finance Market

2021 ◽  
Vol 11 (01) ◽  
pp. 14-28
Author(s):  
Fares Djafri ◽  
Mohamad Akram Laldin ◽  
Abdelkader Laallam
Keyword(s):  
Success Factors ◽  
Public Awareness ◽  
Legal Framework ◽  
Global Perspective ◽  
Inductive Method ◽  
Islamic Finance ◽  
Belt And Road Initiative ◽  
Financial Industry ◽  
Belt And Road ◽  
The Government

Purpose: Islamic finance is considered one of the fastest-growing segments of the global financial industry. Over the last four decades, Islamic finance has expanded globally to western and other non-Muslim countries. This paper aims to explore the potential for China to tap into the Islamic finance market and the challenges that may face the implementation of Islamic finance there. Methodology: This study adopts a qualitative method of inquiry and utilizes the inductive method and content analysis to build comprehensive knowledge that would assist in exploring the significance and potential benefits that China may gain from the adoption of Islamic finance. Findings: The study reveals that China has a huge opportunity to capitalize on Islamic finance for economic development, particularly in the implementation of China’s Belt and Road Initiative (BRI). The paper also highlights the critical success factors for introducing Islamic finance in China, most importantly, political will. Genuine support from the government is needed for the effective introduction of Islamic finance in the country. This support should be subsequently followed by the development of the legal framework, an amendment of the laws, broad publicity to raise public awareness, and effective collaboration with international organizations. Significance: To the best of the authors’ knowledge, this study is among the few which highlights the potential for China to tap into the Islamic finance market. It is expected to contribute to enhancing the implementation and development of the Belt and Road Initiative (BRI).

Malaysia bank merger failure exacerbates future risks

2015 ◽  
Keyword(s):  
Financial Integration ◽  
Economic Conditions ◽  
Islamic Finance ◽  
Financial Industry ◽  
Building Society ◽  
Content Type ◽  
Share Prices ◽  
Bank Merger ◽  
Finance Industry ◽  
Industry Integration

Subject Malaysian banking outlook ahead of ASEAN financial integration. Significance On January 14, Malaysian commercial banks CIMB Group, RHB Capital and Malaysian Building Society (MBS) confirmed in a statement that their merger plan had been cancelled, blaming adverse economic conditions and falling share prices. The merger's cancellation has compounded difficulties facing Malaysian banking, and disadvantaged Malaysia in ASEAN financial industry integration and in expanding its Islamic finance industry. Impacts Malaysia will face increasing competition in Islamic finance. Until market conditions improve, Malaysian banks cannot realistically strengthen their capital bases. RHB may seek a merger to strengthen its business position.

Defining Harmonisation of Sharīʻah Rulings in Islamic Finance

2016 ◽  
Vol 30 (3) ◽  
pp. 292-304 ◽  
Author(s):  
Amir Shaharuddin
Keyword(s):  
Banking System ◽  
Islamic Finance ◽  
Financial Industry ◽  
Finance Industry ◽  
Shed Light

Having been applied for over four decades, the Islamic finance industry faces a divergence of opinions on the Sharīʻah, resulting from different interpretations adopted by Sharīʻah scholars when modifying classical fiqh doctrines to suit the current banking system. Although juristic disagreement is acceptable from a fiqh perspective, its practice in the financial industry brings more disadvantages than benefits. Recently the call for harmonising Sharīʻah rulings has become stronger. This article defines what is meant by harmonisation of Sharīʻah in the context of the Islamic finance industry, and outlines its scope and contribution. The discussion is pertinent due to confusion over the term ‘standardisation’. Contemporary Sharīʻah scholars and practitioners in the financial industry appear to be in disagreement when elaborating upon the issue. Hence, it is hoped that this article will help clarify the meaning of ‘harmonisation’ and shed light on how this can be accomplished to benefit the financial industry.

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