Syari'ah Compliance for Developing Innovation of Sharia Banking Products in Indonesia

2017 ◽  
Vol 1 (2) ◽  
pp. 57-62
Author(s):  
Dasep Sugandi
Keyword(s):  
International Standards ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Real Sector ◽  
Islamic Banks ◽  
Preventive Action ◽  
Literature Study ◽  
Financial Products ◽  
Shariah Governance

This paper discusses the application of Sharia compliance to industry and Islamic finance business. Sharia compliance is a possible means of preventing risk and fraud in the real sector. This also applies to the innovation of Islamic financial products. Shariah rules are expected to be a guide in the operationalization of Islamic banking in Indonesia. With literature study, this paper found that Shariah compliance serves as an ex-ante (preventive) action and measure, to ensure policies, rules, systems and procedures, and business activities undertaken by Islamic banks. Innovation of Islamic banking products refers to sharia standards and shariah governance sourced from Qur'an and Hadith, guided by international standards, fulfillment of integrity and quality of Islamic banking human resources, suitability of contracts, and not dozens of people as consumers.

Bai ‘Al-Tawarruq: Concept Of Islamic Financing?

2016 ◽  
Vol 4 (3) ◽  
pp. 49
Author(s):  
Luqman Nurhisam
Keyword(s):  
Islamic Law ◽  
Legal Framework ◽  
Islamic Finance ◽  
Basic Rule ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Research Subjects ◽  
Financial Products ◽  
Commodity Trading ◽  
Private Financing

Shariah Committee in Malaysia in his fatwa has legitimized the execution of the contract al-Tawarruq and al-'nah in Islamic banking practices, while the contract is not ratified by the National Sharia Council in Indonesia. This study will discuss the reasons and background differences fatwa, and an aspect ratio of banking products and the legal framework used to legitimize Islamic financial products in Indonesia and Malaysia. Therefore, further research is needed to analyze how the views of the scholars against al-Tawarruq along with proof of his, and the extent to which the contract tawarruq has been applied in Islamic finance, especially in Indonesia and Malaysia. As a result of a comparison of Islamic financial products in general, and the legal framework used by the Sharia Board between Indonesia and Malaysia. The method used is descriptive qualitative analysis. In this study, the research subjects are the scholars of Sharia Council. While the object of research is the view of the scholars of fiqh against al-Tawarruq, aspects of financial products, and the framework of Islamic law. From this study, it was found that the mechanism of al-Tawarruq, can not be regarded as an Islamic financial products, because a lot of flaws in it. Hilah known that there are not good that lead to usury, so this is the reason of the majority of scholars do not technically separated in Indonesia. However, as far as the development of the contract used that alTawarruq al-fiqhi been applied in syariah commodity trading in the Jakarta Futures Exchange. While Malaysia believes that the buying and selling of al-Tawarruq is halal as the basic rule for the legitimacy of the agreement, which has been applied in private financing in Islamic banks, as well as a commodity murabaha on Bursa Malaysia namely Bursa Suq Al-Sila.  

Ownership Risk in Contemporary Islamic Banking

2020 ◽  
pp. 189-211
Author(s):  
Alam I. Asadov
Keyword(s):  
Risk Taking ◽  
Current Situation ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Policy Recommendations ◽  
Islamic Banks ◽  
Financial Products ◽  
Real Risk

The unwillingness of contemporary Islamic banks to undertake real business risks has left many to ponder on whether the objectives laid down by the industry's founders have been realized. The need for real risk taking by Islamic banks is critical to justify the profits they earn in the forms of margins, rents, or service charges. This chapter analyzes issues relating to ownership risk (ḍamān al-milkiyyah) in Islamic banking by examining three of its popular products, namely Murabahah (mark-up sale), Ijarah (leasing), and Musharakah Mutanaqisah (diminishing partnership). Following close scrutiny, the chapter concludes that principles of ownership risk as laid down in Fiqh Muamalat (law of transactions) are violated in each of the studied products. Unfortunately, the problem extends beyond these products to include a number of other Islamic financial products. The author calls for closer attention to this important Shari'ah concept of ownership risk in designing Islamic finance products and offers some policy recommendations to improve the current situation.

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 Ijtihad in Islamic Finance: A Methodology Approach

2020 ◽  
pp. 64-78
Author(s):  
Amir Shaharuddin
Keyword(s):  
Banking Industry ◽  
Methodological Approach ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Muslim Community ◽  
Financial Products ◽  
Banking Institutions ◽  
New Challenges ◽  
Muslim Scholars

Islamic classical contracts have been revitalized in creating various financial products in Islamic banking institutions. However, their application in the current banking industry is not without argument. It is viewed that the classical contracts are not practiced as propounded in the classical fiqh doctrines. The article discusses the issue by proposing a different methodological approach for Shariah advisors in guiding Islamic banks. Shariah advisors in Islamic banking institutions are encouraged to unbind themselves from nominated Islamic classical contracts (uqud al-musamma’). They need to unveil new contracts that suit with modern practices and authentically able to solve problems and limitations faced by Islamic banks. Based on examination of twelve main classical texts of the four Sunni schools, it is found that Islamic classical commercial contracts evolved over times especially in the Hanafis, Shafi’is and Hanbalis schools. Past Muslim scholars expanded the classical contracts in response to new challenges and problems encountered by Muslim community in their commercial dealings. The evolution of Islamic commercial contracts can be further enhanced by adhering to the principles of transparency, honesty, mutual consent and humanitarian goals.

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 The Implementation of Islamic Corporate Governance (ICG) on Sharia Banking in Indonesia

2019 ◽  
Vol 2 (1) ◽  
pp. 29
Author(s):  
Nova Rini
Keyword(s):  
Corporate Governance ◽  
Financial Institutions ◽  
Financial Institution ◽  
Research Question ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Literature Study ◽  
Financial Products ◽  
Islamic Bank ◽  
Finance House

In 2001, a financial institution in Turkey went bankrupt. The financial institution is "Ihlas Finance House". The cause of the bankruptcy of financial institutions according to Islamic finance economists is as a result of weaknesses in the internal and external mechanisms of corporate governance. The purpose of writing this article is to find out how the implementation of Islamic Corporate Governance in Islamic Banking. The method used in this article to answer the research question is a literature study. The results of this study indicate that Islamic banking financial institutions in Indonesia have not fully implemented Islamic Corporate Governance (ICG). The implementation of Islamic Corporate Governance (ICG) that has not been fully implemented is sharia compliance (syari'ah compliance). Sharia compliance in Islamic bank financial products. Conclusion of this article: 1. Implementation of Islamic Corporate Governance (ICG) in Islamic banking is accommodated in the Sharia Banking Law and Bank Indonesia Regulations; 2. Islamic Corporate Government (ICG) can be seen from the establishment of Sharia Supervisory and Sharia Compliance Board in Islamic banking; and 3. Islamic banking in Indonesia does not yet fully implement Islamic Corporate Governance (ICG) in sharia compliance for Islamic financial products.

Shariah Governance Systems of Islamic Banks in Bangladesh

2021 ◽  
pp. 261-279
Author(s):  
Md. Kausar Alam ◽  
Mosab I. Tabash ◽  
Md. Farjin Hassan ◽  
Nihad Hossain ◽  
Md. Akib Javed
Keyword(s):  
Central Bank ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Profit Rate ◽  
Face To Face ◽  
Banking Regulations ◽  
Governance Systems ◽  
Shariah Governance ◽  
Corporate Social

This chapter explores the Shariah Governance (SG) of Islamic banks in Bangladesh as compared to global SG practices. Applying semi-structured face-to-face interviews, this study finds that Bangladesh is not far behind the global SG system. Most of the countries have enacted Islamic banking regulations, but Bangladesh does not have any separate banking legislation for Islamic banks. Islamic banks are working on their own instead of centralized functioning under the regulations of the central bank. Islamic banks in Bangladesh are mainly dominated by the ‘buy and sell mode' which is diminishing the real sense of Islamic finance. Islamic banks are not practicing true Islamic banking because of the predetermined profit rate and violation of the Shariah principles. But the central bank has accepted it due to social demands and people's expectations. The corporate social responsibility functions are broader and more focused in Bangladesh as compared to global practices.

scholarly journals Market Share Islamic Banking In Indonesia

2019 ◽  
Vol 8 (1) ◽  
pp. 124-137
Author(s):  
Zulfikar Hasan
Keyword(s):  
Market Share ◽  
Secondary Data ◽  
Descriptive Study ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Banking Regulations ◽  
Banking Market ◽  
Conventional Banks

At the end of 2016, the Islamic banking market share stood at 356.5 trillion Indonesian rupiahs ($26.7 billion), equivalent to 5.03 per cent of the total banking sector’s assets. Islamic banking assets have risen faster year-on-year compared to conventional banking, registering a growth of 8.8 per cent in 2015 and 20.3 per cent in 2016. The performance of the Islamic banking industry in Indonesia has yet to satisfy the public’s expectations. Although with a market of more than 200 million Muslims, Islamic banks in Indonesia still face difficulties luring more customers and increasing their assets. For three consecutive years, the market share of the sharia banks in the country stood still at less than 5 per cent. According to the Global Advisors Islamic Finance Outlook Report for 2016, no Indonesian Islamic banks were ranked in the top five largest banks based on assets in Southeast Asia. This is an alarming situation for the industry and regulators. Thus, it evokes a question: Is the market becoming saturated for Islamic finance? This study aims to determine the factors that affect the market share of Islamic banks in Indonesia. With a focus on four main items, Islamic banking regulations, Islamic banking inclusion and literacy are still low from conventional banks, Islamic banking still does not have sufficient capital and the number and quality of Human Resources (HR) that are inadequate. This study uses an analytical descriptive study is to describe and analyzed data obtained based on primary and secondary data. While the method used is normative and focused on the study of literature, which is then analyzed qualitatively juridical.

scholarly journals Quo Vadis, Islamic Banking? Literature Study on Islamic Commercial Banks and Sharia Business Units in Indonesia

2020 ◽  
Vol 11 (4) ◽  
pp. 47
Author(s):  
Tita Djuitaningsih
Keyword(s):  
Human Resources ◽  
Commercial Banks ◽  
Profit Sharing ◽  
Islamic Banking ◽  
Real Sector ◽  
Literature Study ◽  
Business Units ◽  
Quo Vadis ◽  
The Government

This paper aims to describe the condition of the financing portfolio in Islamic banking that is not following its characteristics, namely profit sharing; identify the cause and contribute to the solution of the problem. The dominance of murabahah financing is shown in proportion to the position on January 31, 2017, which reached 60% of total financing. The macro impact of the domination of murabahah transactions is that the monetary sector moves faster than the real sector which can ultimately lead to an economic crisis. Micro-impact, murabahah financing tends to encourage individual society to be consumptive because the purpose of this financing is more for consumptive matters, while profit-based financing will encourage individuals to be productive because profit-based financing is definitely intended to finance productive things. Broadly speaking, the problem needs to be addressed through two things. The first solution comes from the Government in the form of the availability of supporting institutions and regulations that are conducive to increasing the portfolio of profit-based financing. The second solution is sourced from Islamic banking itself in the form of an increase in the quantity and quality of Islamic human resources in the form of massive but highly selective recruitment and providing training to increase understanding of the concept of Islamic sharia and sharia banking practices in a professional manner.

Potential of Islamic finance: A survey of Tunisian Northwest companies

2017 ◽  
Vol 5 (2) ◽  
pp. 28
Author(s):  
Rym Ammar Ayachi ◽  
Dhafer Saidane ◽  
Fayçal Mansouric
Keyword(s):  
Financial Institution ◽  
Islamic Finance ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Finance Development ◽  
Negative Effect ◽  
Survey Results ◽  
Potential Demand ◽  
Northwest Region ◽  
Do So

The present paper aims to assess the Islamic products potential demand for entrepreneurs in the Tunisian Northwest region. In order to do so, we developed a questionnaire which was sent to these entrepreneurs. The survey results show that the latter perceive Islamic Finance as a seductive phenomenon. However, its development appears to be difficult. Indeed, according to the survey results, the lack of knowledge may impede the expansion of Islamic banking in Tunisia. Moreover, the following factors: cost, religious conviction, proximity, flexibility and satisfaction of the needs, may affect the entrepreneurs' choice to deal with Islamic financial institution. In addition, the lack of entrepreneurs' confidence with regard to the compliance of Islamic banking with the Shariah principles has a negative effect on Islamic finance development in the Tunisian Northwest region. For this reason, Tunisian Islamic banks should put more effort to reinforce their competitiveness.

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