Shariah Governance Framework of the Islamic Banks in Malaysia. Author’s Details:Corresponding Author- (1) Nazreen Tabassum

Author(s)

Nazreen Tabassum Chowdhury , Fahim Shaker , Fahim Shaker ,

Download Full PDF Pages: 115-124 | Views: 293 | Downloads: 82 | DOI: 10.5281/zenodo.3462980

Volume 4 - October 2015 (10)

Abstract

Purpose :

The current paper aims to summarize the current practice of Shariah Governance within the context of Islamic banks and financial institutions in Malaysia. The paper highlights the major challenges faced by such organizations in implementing Shariah Governance. The paper intends to address the role of the Shariah board, the committee and the management relation in this regard

Methodology : Exploratory research method is applied within the field of Islamic banking and finance to address the Shariah Governance practice in Malaysia. In this regard, numerous relevant articles are reviewed featuring Shariah banking practices by Islamic organizations. Comparative study method is applied to understand the difference between the Shariah banking practices and corporate governance system applied by conventional financial institutions.

Findings : As found in this study, majority of the shariah governance practices are faced with challenges of shortage of knowledge within Islamic scholars. The lack of established standard, the failure of management to differentiate between conventional corporate governance and Shariah governance, difficulties in understanding Shariah based laws, misinterpretation of rules and such are some of the key findings of this study.

Research Limitation : This paper is typically limited to the exploratory method of analysis within the context of 'Shariah Governance practice by Islamic banks in Malaysia. Additionally, this paper is only limited to the study within Malaysian organizations, while other islamic institutions in neighboring countries that are practicing similar laws are excluded.

Originality of the paper : The paper subjectively addresses the problems and prospects of Shariah banking practice within Malaysian organizations along with comparison with conventional banking organizations. Therefore, the study stands out as a quite original piece of work staying in line with its main subject. 

Keywords

 Shariah Governance, Islamic banking, Corporate Governance, Islamic Scholar, Malaysia.

References

  1. AAOIFI Accounting and Auditing Organization for Islamic Financial Institutions, 1998. Accounting and Auditing Standards for Islamic Financial Institutions, Bahrain.
  2. AAOIFI. (2009). “International Standards for Islamic finance”.
  3. AAOIFI. “Conceptual Framework for Financial Reporting by Islamic Financial Institutions”.
  4. Ansari,M,O. “Audit & Shariah compliance- issues in Islamic banking and finance”.
  5. Ayub M. (2007). “Understanding Islamic Finance”, John Wiley & Sons, Ltd, England.
  6. Bank Negara Malaysia (1983) Islamic Banking Act (IBA 1983)
  7. Bank Negara Malaysia (1989) Banking and Financial Institution Act (BAFIA 1989)
  8. Bank Negara Malaysia. “Shariah Governance Framework”.
  9. Beekun, R. (1997). “Islamic business ethics”. Virginia: The International Institute of Islamic Thought.
  10. “Corporate governance analysis in Malaysia”. RHB Research. Available at http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_d7f99de4-cb73c03a-c8c7d600-e2f24a60
  11. Dusuki,W,A. “Corporate and shariah governance of Islamic financial institutions”. International Shari’ah Research Academy for Islamic Finance (ISRA)
  12. El-Gamal, M. A. (2005). “Islamic Bank Corporate Governance and Regulation: A Call for Mutualization”. Rice University.
  13. Grais, W and Pellegrini M. (2006). “Corporate Governance and Shariah compliance in institutions offering Islamic Financial Services”. World Bank Policy Research Working, Paper 4054.
  14. “Guidelines on the Governance of Shariah Committee for the Islamic Financial Institutions”. BNM, Kuala Lumpur. Available at: http://www.bnm.gov.my/guidelines/01_banking/ 04_prudential_stds/23_gps.pdf
  15. Hassan,S. & Christopher,K. (2005),"Corporate governance statement disclosure of Malaysian banks and the role of Islam", Asian Review of Accounting, Vol. 13 Iss: 2 pp. 36 – 50
  16. Hasan, Z. (2008). “Corporate Governance of Islamic Financial Institutions”. Retrieved from zulkiflihassan.wordpress.com.
  17. Hasan Z. (2009). “Corporate Governance: Western and Islamic Perspectives”. International Review of Business Papers, Vol.5 No.1 January 2009 Pp.277-293
  18. Hasan, Z. (2010). “Regulatory Framework of Shari’ah Governance System in Malaysia, GCC Countries and the UK”. Kyoto Bulletin of Islamic Area Studies, 82–115.
  19. Ibrahim, & Hameed,S. (2007),"IFRS vs. AAOIFI: The clash of Standards?” MPRA Paper No.12539, International Centre for Education in Islamic Finance. Available at http://mpra.ub.uni-muenchen.de/12539/
  20. IFSB.(2006) . “Guiding Principles On Corporate Governance For Institutions Offering Only Islamic Financial Services (Excluding Islamic Insurance (Takaful) Institutions And Islamic Mutual Funds)”.
  21. IFSB .(2009). “Guiding Principles on Shari'ah Governance Systems For Institutions Offering Islamic Financial Services”.
  22. Institute of Islamic Banking and Insurance. (2011). “Shari'ah Governance and the Reform of Islamic Finance”. Retrieved from New Horizon: http://www.newhorizonislamicbanking.com/index.cfm?section=lectures&action=view&id=11174
  23. Islamic Banking and Takaful Department. (2004). Guidelines on the Governance of Shariah Committee for the Islamic Financial Institution. Bank Negara Malaysia.
  24. Islamic Banking and Takaful Department. “Shariah Governance Framework for Islamic Financial Institution.” Bank Negara Malaysia
  25. Ismail H. & Latif R. (2001), “Survey & Analysis of Financial Reporting of Islamic Banks Worldwide”, Arab-Malaysian Banking Group and Malaysian Accountancy Research and Education Foundation, Kuala Lumpur.
  26. Karim, R.A.A. (1990). “Standard setting for the financial reporting of religious business organizations: The case of Islamic banks”. Accounting and Business Research 20(80): 299-305.
  27. Kasri R.A. (n.d). “Corporate Governance: Conventional vs. Islamic Perspective”.
  28. Lanai Kijang , (2009), “Regulatory Framework for Islamic Banking: Malaysian Case Tariqullah Khan”, Corporate Governance in Islamic Banks.
  29. Mannan, M.A. (1980). “Islamic banking: Definition, objectives, methods and functions”. Dacca: Islamic Economic Research Bureau.
  30. Muhammad Taimoor Hassan. (2012), “Corporate Social Responsibility Disclosure”.(A Comparison between Islamic and Conventional Financial Institutions in Bahawalpur Region), Vol. 2, No. 1,
  31. Racha Ghayad, (2008),"Corporate governance and the global performance of Islamic banks", Humanomics, Vol.24 Iss: 3 pp. 207 – 216
  32. Rahman, Z. A. (2006, July 19). “How Islamic Banks Complying with Shariah Requirements”. NST business Times.
  33. Rahim A. (2008). “Shariah Audit for Islamic Financial Services: The needs and challenges”. Paper presented at ISRA Islamic Finance Seminar, Mandarin Hotel, Kuala Lumpur.
  34. Rahman,A,Z. & Zainuddin,Y. “Accounting treatment for Mudarabah regarding unrestricted investment deposits in Malaysian Islamic Banks”
  35. Shafii,Z, Salleh,S. & Shahwan,H,S. (2010),"Management of Shariah Non-compliance audit risk in the Islamic financial institutions via the development of Shariah compliance audit framework and Shariah audit program", Kyoto Bulletin of Islamic Area Studies, 3-2 , pp. 3–16
  36. Shaharuddin,A. (2011).“Shariah Governance of Malaysian Islamic Banking Institutions”. Vol 14, No 2.
  37. Shanmugan,B. & Perumal,V. (2006). “Governance issues and Islamic banking”. IFSB, Vol.3 Iss. 37. Available at http://www.islamicfinancenews.com/listing_article_ID1.asp?nm_id=3782&searchid=7751
  38. “Shariah governance a challenge to Islamic banking”. (2009). Available at http://www.global-islamicfinance.com/2009/11/shariah-governance-challenge-to-islamic.html
  39. Suleiman, N.M. (2000). Corporate governance in Islamic banks. Society and Economy in Central and Eastern Europe XXII(3): 98-116. Available at http://www.lib.bke.hu/gty2000-3/nsuleiman.pdf

Cite this Article: