Board, Shariah Committee and Senior Management: Updates on the BNM Shariah Governance Policy Document

Shariah Governance ◽

New Framework

The paper aims to examine the relevant provisions of the newly released BNM Shariah Governance Policy Document relating to the board of directors, Shariah Committee and senior management of the Islamic Financial Institutions (IFIs) in Malaysia. The study is qualitative-based research. It reviews two documents, i.e. BNM Shariah Governance Framework 2010, and BNM Shariah Governance policy 2019. It uses a content analysis approach to understand and compare the two frameworks from the perspective of the board, the Shariah Committee and senior management. The study finds that SGP 2019 enhanced features of the preceding SGF 2010 revolving around enhanced board oversight and roles over Shariah governance, strengthened Shariah Committee (SC) requirements in providing independent and sound advice to IFIs, as well as a greater expectation for the board and senior management in promoting Shariah compliance culture. This paper examines the areas which have been addressed by the new framework to improve several issues which have been highlighted during the implementation of the previous framework, SGF 2010.

Journal of Islam in Asia <span style="font-size: 0.6em">(E-ISSN: 2289-8077)</span> ◽

Duties and Decision-Making Guidelines for Sharī‘ah Committee: An Overview of BNM (Tugas-Tugas dan Garis Panduan Dalam Membuat Keputusan Bagi Jawatankuasa Shariah: Satu Gambaran Umum BNM)

10.31436/jia.v16i3.914 ◽

2019 ◽

Vol 16 (3) ◽

pp. 300-318

Author(s):

Muhammad Amanullah ◽

Muhammad Nabil Fikri Bin Mhd Zain

Keyword(s):

Decision Making ◽

Financial Institutions ◽

Basic Principle ◽

Research Paper ◽

Islamic Finance ◽

Related Literature ◽

Governance Framework ◽

Shariah Governance ◽

Critical Methods

Shari`ah committee of every Islamic bank or other Islamic financial institutions has some specific duties. Likewise, this committee should follow some guidelines in making its decisions. Bank Nigara Malaysia (BNM) has prescribed these duties and decision-making guidelines in its Sharī‘ah Governance Framework (SGF). Using analytical and critical methods, this research paper aims to study these duties and decision-making guidelines. The duties of the Sharī‘ah Committee set by BNM include the basic principle of advising, endorsing, supervising, assisting, consulting and reporting on Sharī‘ah matters. Besides that, the decision-making guidelines for Sharī‘ah Committee by BNM are well-structured and practical. This study contributes to the related literature by showing that the country’s support towards the Islamic finance sector, through BNM’s guidelines, may help the development of IFIs in the country. The results drawn from this study may help policymakers to develop better duties and decision-making guidelines for Sharī‘ah Committees. This study is limited to the SGF issued by BNM in 2010 only. Keywords: Sharī‘ah Committee, Duties, Decision-making, Guidelines. Abstrak Jawatankuasa Shariah bagi setiap bank Islam atau institusi kewangan Islam (IFIs) mempunyai beberapa tugas tertentu. Begitu juga, jawatankuasa ini perlu mengikuti beberapa garis panduan dalam membuat keputusannya. Bank Negara Malaysia (BNM) telah menetapkan tugas-tugas ini dan juga garis panduan membuat keputusan dalam Shariah Governance Framework (SGF). Dengan menggunakan kaedah analitikal dan kritikal, penyelidikan ini bertujuan mengkaji tugas-tugas serta garis panduan membuat keputusan tersebut. Tugas-tugas jawatankuasa Shariah yang ditetapkan oleh BNM merangkumi prinsip asas dalam menasihati, menyokong, menyelia, membantu, berunding dan melaporkan berkenaan isu-isu Shariah. Di samping itu, garis panduan membuat keputusan ke atas jawatankuasa Shariah yang ditetapkan oleh BNM adalah amat berstruktur dan praktikal. Kajian ini menunjukkan bahawa sokongan yang diberikan oleh negara terhadap sektor kewangan Islam melalui garis panduan ini boleh membantu kepesatan IFIs dalam negara Malaysia. Keputusan yang diperoleh daripada kajian ini dapat membantu penggubal dasar untuk membangun dengan lebih baik tugas-tugas serta garis panduan membuat keputusan untuk Jawatankuasa Shariah. Kajian ini terhad kepada SGF yang dikeluarkan oleh BNM pada tahun 2010 sahaja. Kata Kunci: Jawatankuasa Shariah, Tugas-Tugas, Membuat Keputusan, Garis Panduan.

Journal of Islam in Asia <span style="font-size: 0.6em">(E-ISSN: 2289-8077)</span> ◽

Malaysian’s Government Linked Investment Companies: Is There a Need for Shariah Governance Framework? (Syarikat Pelaburan Berkaitan Kerajaan Malaysia: Adalah Adakah Perlu Rangka Kerja Tadbir Urus Syariah?)

10.31436/jia.v17i2.961 ◽

2020 ◽

Vol 17 (2) ◽

pp. 198-222

Author(s):

Wan Amir Shafiq Bin Ab. Nasir ◽

Rusni Hassan ◽

Ibrahim Musa Tijani

Keyword(s):

Data Collection ◽

Central Bank ◽

Financial Institutions ◽

Document Analysis ◽

Islamic Finance ◽

Governance Framework ◽

Business Operation ◽

Investment Companies ◽

This paper attempts to examine the absence of a Shariah Governance Framework (SGF) in Malaysian’s Government Linked Investment Companies (GLICs). A GLIC is essential for the Malaysian economy, while SGF is practiced by the Islamic Financial Institutions (IFIs) in Malaysia to ensure end-to-end Shariah compliant process in the business operation of the banks and takaful operators. When the GLIC aims to provide Shariah compliant returns to their investors (public), the move should be supported by all stakeholders as majority of the investors of the GLICs are Muslims, and thus the demand for a Shariah compliant dividend is expected. As for the IFIs in Malaysia, the Central Bank of Malaysia requires all IFIs to establish an SGF to ensure their activities comply with Shariah principles. The question arises whether this requirement should be practiced by the GLICs too. This paper examines the importance of SGF to be established by the GLICs. Since this study is focusing on the importance of SGF in GLICs, interviews and document analysis methods are used for data collection. Keywords: Government Linked Investment Companies, Shariah Governance Framework, Shariah Compliance, Islamic Finance. Abstrak Makalah ini cuba meneliti permasalahan mengenai ketiadaan Kerangka Tadbir Urus Syariah (Shariah Governance Framework atau SGF) di Syarikat Pelaburan Berkaitan Kerajaan (Government Link Investment Companies atau GLIC) di Malaysia. Syarikat Pelaburan Berkaitan Kerajaan adalah penting untuk ekonomi Malaysia, sementara Kerangka Tadbir Urus Syariah merupakan peraturan yang dipraktikkan oleh Institusi Kewangan Islam (IKI) di Malaysia untuk memastikan proses patuh Syariah dipatuhi secara keseluruhan dalam setiap aspek operasi bank Islam dan pengendali takaful. Apabila Syarikat Pelaburan Berkaitan Kerajaan menjalankan perniagaan bertujuan untuk memberikan pulangan patuh Syariah kepada pelabur mereka, langkah tersebut harus disokong oleh semua pihak yang berkepentingan kerana majoriti pelabur Syarikat Pelaburan Berkaitan Kerajaan adalah beragama Islam yang mengharapkan dividen yang patuh Syariah. Di Malaysia, Bank Negara Malaysia menghendaki semua IKI mengamalkan Tadbir Urus Syariah untuk memastikan aktiviti mereka mematuhi prinsip Syariah. Persoalan yang timbul adakah syarat ini juga harus dipraktikkan oleh Syarikat Pelaburan Berkaitan Kerajaan. Makalah ini mengkaji sama ada perlunya Kerangka Tadbir Urus Syariah ditubuhkan oleh Syarikat Pelaburan Berkaitan Kerajaan ini. Kajian ini akan memfokuskan pada keperluan Kerangka Tadbir Urus Syariah dalam Syarikat Pelaburan Berkaitan Kerajaan di mana kaedah temuduga dan analisis dokumen adalah kaedah yang digunakan untuk pengumpulan data. Kata Kunci: Syarikat Pelaburan Berkaitan Kerajaan, Kerangka Tadbir Urus Syariah, pematuhan Syariah, kewangan Islam.

Comparative Analysis on Shariah Governance in Malaysia: SGF 2010, IFSA 2013 and SGPD 2019

Journal of Public Administration and Governance ◽

10.5296/jpag.v10i1.16157 ◽

2020 ◽

Vol 10 (1) ◽

pp. 110 ◽

Cited By ~ 2

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 ◽

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.

Islamic Financial Services Act (IFSA) 2013 and the Sharīʿah-compliance requirement of the Islamic finance industry in Malaysia

ISRA International Journal of Islamic Finance ◽

10.1108/ijif-12-2017-0052 ◽

2018 ◽

Vol 10 (1) ◽

pp. 94-101 ◽

Cited By ~ 10

Author(s):

Mohamad Akram Laldin ◽

Hafas Furqani

Keyword(s):

Content Analysis ◽

Financial Institutions ◽

Financial Services ◽

Design Methodology ◽

Islamic Finance ◽

Content Type ◽

Governance Framework ◽

Finance Industry ◽

Comprehensive Framework

Purpose This paper aims to observe the development of the Sharīʿah governance framework (SGF) and practice in Islamic financial institutions (IFIs) in Malaysia. Design/methodology/approach The study is a qualitative-based research. It uses various documents and content analysis approach to understand and analyze the structure, process and practice of SGF in IFIs in Malaysia. Findings It is found that the Central Bank of Malaysia, Bank Negara Malaysia, has attempted to develop a comprehensive framework of Sharīʿah governance for IFIs in Malaysia. The framework governs the practice of the industry, covers stakeholders’ scope of duties and responsibilities and provides details on processes and procedures in the operations of IFIs to achieve the objective of Sharīʿah compliance. To maintain the relevance of the SGF to the needs of the industry, the framework has also been updated recently in 2017. The amendments aim to strengthen the effectiveness of Sharīʿah governance implementation within the Islamic finance industry. Originality/value This study attempts to comprehensively examine the evolution of the SGF Sharīʿah governance framework for IFIs in Malaysia. The Malaysian model of the SGF is unique and could be emulated by other countries in developing the Islamic finance industry in their respective jurisdictions.

http://habibiaislamicus.com/index.php/hirj/article/view/186

Habibia Islamicus ◽

10.47720/hi.2021 ◽

2021 ◽

Vol 5 (3) ◽

pp. 1-18

Author(s):

Zohra Jabeen

Keyword(s):

Career Counseling ◽

Financial Institutions ◽

Islamic Banks ◽

Governance Framework ◽

Expert Opinions ◽

Proper Training ◽

Precautionary Measures ◽

Internal Sources ◽

Providing its services in accordance with the principles of Shariah and maintaining the trust of stakeholders is essential for the existence of Islamic financial institutions. Islamic banks should be run under an integrated and regulated standard system called Shariah Governance Framework (SGF) The SBP, AAOFI and IFSB have proposed separate governance frameworks, However, the framework issued by the SBP is characterized by the fact that external Shariah audit is an important component of it which to ensure the independent and sovereign accountability of Islamic financial institutions. This means that Islamic financial institutions will no longer be content with internal sources such as internal Shariah audits and reviews to verify Shariah compliance, but will necessarily have to verify it with a third external party called an external Shariah audit. But after the mandatory implementation of this type of audit in Pakistan, there are many problems such as disinclination of experts, uniformity in the duration of audit and burden of responsibilities, non-standardization in the affairs of Islamic financial institutions, lack of precautionary measures taken by regulators, lack of curriculum and proper training, lack of detailed framework or format and lack of career counseling etc. This research paper covers these difficulties in the light of expert opinions.

SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010

UUM Journal of Legal Studies ◽

10.32890/uumjls.8.2017.4642 ◽

2017 ◽

Author(s):

Rusni Hassan ◽

Ahmad Azam Othman ◽

Muhammad Naim Omar ◽

Mohammad Deen Mohd. Napiah ◽

Mohamad Asmadi Abdullah ◽

...

Keyword(s):

Risk Management ◽

Financial Institutions ◽

Financial Services ◽

Management Process ◽

Islamic Banks ◽

Regulatory Requirements ◽

Governance Framework ◽

Risk Management Process ◽

Abstract: Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and management adhere to the Shariah principles and values. Failure to comply with Shariah, will expose Islamic Financial Institutions (IFIs) to Shariah non-compliance risk. Subsequently, it is an essential duty of the IFIs to manage Shariah risk properly. In order to effectively manage the risk vulnerability of the IFIs, proper measures for risk management have been put in place in different frameworks that are either domestic or international based. In the Malaysian context, IFIs are guided by relevant regulations such as the Shariah Governance Framework 2010, IFSB principles and Islamic Financial Services Act 2013 with regards to Shariah risk management. This research examined the regulatory requirements of the Shariah risk management process for Islamic financial institutions that operate in Malaysia, in the context of the Guidelines on Shariah Governance Framework 2010 issued by the Central Bank of Malaysia. The paper discusses the concept of “risk”, “Shariah risk” and “Shariah non-compliant risk” in the context of Islamic Financial Institutions and also examines the process adopted by the Malaysian IFIs in managing the Shariah risk. The hypotheses that the paper seeks to establish are that there are differences between the concept of Shariah risk and Shariah non-compliant risk; and that the Shariah risk management process adopted by the IFIs are different than the conventional risk management process due to the unique features and requirements of the IFIs. Keywords: Shariah, Risk management, Islamic Financial Institutions. Abstrak: Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risiko”, “risiko Syariah” dan “risiko tidak patuh Syariah” dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI. Kata kunci: Syariah, Pengurusan risiko, Institusi Kewangan Islam.

Shariah Governance Framework for IBIs: A Critical Analysis

Islamic Banking and Finance Review ◽

10.32350/ibfr/2020/0700/1116 ◽

2020 ◽

Vol 7 ◽

pp. 1-1

Author(s):

Abdul Sattar Abbasi

Keyword(s):

Board Of Directors ◽

Performance Indicators ◽

Design Methodology ◽

Continuous Monitoring ◽

Governance Framework ◽

Business Operations ◽

The Board Of Directors ◽

Banking Institutions ◽

And Performance ◽

Purpose: The purpose of the article is to critically analyse State Bank of Pakistan’s Shariah governance framework (SGF) which is indeed a backbone for the survival of Islamic banking institutions (IBIs). Shariah compliance along with other contemporary standards makes it more challenging for the staff to ensure satisfaction of all stakeholders of IBIs. Besides profitability, IBI customers need complete satisfaction that their funds have been administered according to the Shariah law and returns are from permissible business operations. Design/methodology/approach: SGF was analysed for making inferences by systematically and objectively identifying special characteristics of the framework for IBIs. Utilising interpretive and naturalistic approach including both observational and narrative based discourses associated with ground realities, the article outlines pragmatic modifications in existing framework to bridge the gap between Shariah boards and the board of directors. Findings: Over the years Shariah governance mechanisms have significantly groomed in Pakistan, however, the need and room for improvement always remains for further developments . SGF enables convenient operations of IBIs with predetermined set of instructions and objectives. Nevertheless, IBIs need continuous monitoring and handholding to implement the SGF in true spirit. This article critically analysed updated SGF (2018) through content analysis and identified a few important gaps in the existing SGF. Those gapes such as absence of It has been observed that lack of performance evaluation of Board of Directors (BoD) and Shariah Board (SB) is important impediment in the development and expansion of IBIs. Originality/Value: Current study identifies that existing SGF is devoid of determining key performance indicators (KPIs) for IBIs in terms of Shariah compliance and performance of BoDs and SBs. Therefore, this article concluded with proposed new Shariah governance framework for IBIs to ensure close liaison between BoD and SB through Board’s Committee of Shariah Governance (BCSG) with the provision of indicators for Shariah compliance ratings of IBIs.

Aplikasi Kerangka Kerja Tadbir Urus Syariah Dalam Agensi Mengurus Zakat di Melaka

Journal of Fatwa Management and Research ◽

10.33102/jfatwa.vol0no0.291 ◽

2019 ◽

pp. 396-412

Author(s):

Abdul Halim Ismail ◽

Muhammad Firdaus Tubarri ◽

Noorzakry Nor Jamal ◽

Azhana Othman ◽

Zunaidah Ab Hasan

Keyword(s):

Financial Institutions ◽

Islamic Law ◽

Negative Perception ◽

Governance Framework ◽

The Public ◽

Highly Sensitive ◽

Shariah Governance ◽

Conceptual Study

Integrity in handling zakat funds is a highly sensitive matter to the community if it is not properly managed. The issue of negative perception towards the distribution of zakat in Malaysia is due to the lack of trust from the community toward the management of the agency managing the Zakat. This will therefore affect the collection as well as the distribution of zakat funds to the eight group of Asnaf. Therefore, it is necessary for the zakat agency to build up and create a good shariah governance framework to the needs of Islamic law as a benchmark in order to make sure all activities undertaken are on track. This conceptual study aims to implement Shariah Governance Framework to overcome the distrust of the community towards the management of Zakat agency since they do not have any standard of shariah governance framework, like other Islamic Financial Institutions in Malaysia. In conclusion, the proposed Shariah Governance Framework proposed in this study, will give an implication to restore the trust and positive perceptions among the public. Abstrak Ketulusan dalam mengendalikan dana umat Islam terutamanya zakat adalah suatu perkara yang sangat sensitif kepada masyarakat sekiranya tidak diurus dengan baik. Isu persepsi negatif masyarakat terhadap agihan zakat di Malaysia merupakan punca masalah kepada ketidakpercayaan masyarakat dalam pengurusan Agensi Mengurus Zakat. Ketidakpercayaan ini akan memberi kesan kepada kutipan zakat dan secara tidak langsung akan mempengaruhi dana agihan zakat untuk diagihkan kepada lapan (8) golongan asnaf yang layak. Oleh yang demikian, menjadi satu keperluan kepada Agensi Mengurus Zakat untuk mewujudkan satu kerangka kerja urus tadbir yang baik dan menepati kehendak syarak sebagai kayu ukur kepada segala aktiviti yang dilaksanakan berada di landasan yang betul. Kajian konseptual ini berhasrat untuk menerapkan satu kerangka kerja Tadbir Urus Shariah dalam Agensi Mengurus Zakat untuk mengatasi masalah ketidakpercayaan masyarakat terhadap pengurusan Agensi Mengurus Zakat. Tambahan pula Agensi Mengurus Zakat tidak mempunyai kerangka Tadbir Urus Shariah yang standard seperti mana Institusi Kewangan Islam yang lain di Malaysia. Oleh yang demikian, kerangka kerja tadbir urus shariah yang akan dicadangkan memberi implikasi untuk mengembalikan kepercayaan dan persepsi yang positif dikalangan masyarakat.

http://habibiaislamicus.com/index.php/hirj/article/view/186

Habibia Islamicus ◽

10.47720/hi.2021.0503u01 ◽

2021 ◽

Vol 5 (2) ◽

pp. 1-18

Author(s):

Zohra Jabeen

Keyword(s):

Career Counseling ◽

Financial Institutions ◽

Islamic Banks ◽

Governance Framework ◽

Expert Opinions ◽

Proper Training ◽

Precautionary Measures ◽

Internal Sources ◽

Halal Governance In Malaysia Companies

Journal of Fatwa Management and Research ◽

10.33102/jfatwa.vol20no1.3 ◽

2020 ◽

pp. 40-52

Author(s):

Yasmin Hanani Mohd Safian

Keyword(s):

Financial Institutions ◽

Best Practice ◽

Current Practice ◽

Islamic Finance ◽

Holding Companies ◽

Governance Framework ◽

The Times ◽

Governance is an important component in Halal industry. Appropriate mechanism should be created to ensure the Halal certified company complies with the Shariah principles. Unlike Islamic finance, Halal industry is less regulated in term of governance. Halal certification is not compulsory and even Halal certificate holding companies do not have clear Shariah governance within the administration to ensure the company fulfil its duty and promise to the stakeholder and the customer. The establishment of proper Shariah governance framework for Halal industry will boosts confidence of the shareholders and the publics that all the practices and activities follow Shariah all the times. Thus, this study investigates current practice of Halal governance in several Malaysian companies. The internal mechanisme in Halal monitoring, controlling, improving and preventing any non-compliance will be assessed. The practice will then be compared to the practice of governance in Malaysian Islamic Financial institutions. The study will help to figure the best practice of Halal governance hence become a proper model to be followed