Shariah governance practices at Islamic fund management companies

Abstract

Purpose The purpose of this paper is to explore the Shariah governance practices of Islamic fund management companies (IFMCs) in Malaysia, with the principal goal of reviewing the need for a comprehensive Shariah governance framework for the Islamic fund management industry. Design/methodology/approach The study was conducted using a qualitative approach via 14 semi-structured interviews with three companies (i.e. Company A, Company B and Company C) involving face-to-face interviews, telephone interviews and emails. Data from the interviews were recorded and later analysed using content analysis. Findings The study finds that Shariah governance processes among the IFMC examined are well-managed; and the current regulations issued by the regulators are sufficient to ensure the Shariah compliance of Islamic fund management industry. In spite of the absence of a comprehensive Shariah governance framework for the industry, most Shariah functions (i.e. Shariah risk management, Shariah review and Shariah audit) are performed by the parent company, except for Shariah research. Nevertheless, Shariah research is not an important function in Islamic fund management because the investment instruments are generally selected from a predetermined list of Shariah-compliant investment options. Practical implications The study offers an overview of Shariah governance practices in the Islamic fund management industry to policymakers and practitioners for the future development of Shariah governance practices among IFMC. Originality/value This is the first paper to study Shariah governance practices in the Islamic fund management industry in Malaysia.

Penilaian Kesehatan Bank Syariah di Indonesia dengan Metode RGEC

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“…protecting their faith; and guaranteeing the welfare of people with religious behavior based on Almighty rules (Hasan et al, 2020).…”

The Need of Shariah Governance for Small and Medium Enterprise (SME): A Literature Review

“…This makes the board of directors have the additional responsibility to control and ensure that the institution operates in accordance with Islamic guidelines . The purpose of establishing such a control system is to ensure constant compliance and implementation of shariah principles by the institution (Muneeza, 2014;Hasan et. al., 2020).…”

“…This is because each economic sector has its own form and characteristics that require a different model of shariah governance to suit the context and needs of each sector. Since there are many studies related to shariah governance focus on IFI only, stated that there is an urgent need to establish a Shariah Governance Framework for the Islamic Capital Market as the sector provides a shariah-compliant investment platform for Islamic banks, takaful companies as well as Muslim investors (Hasan et. al., 2020).…”

“…The guidelines also emphasize the need to appoint a compliance officer to ensure that the business conducted complies with the set guidelines as well as to report any non-compliance issues to shariah advisors, the company's board of directors and the SC. Hasan et. al (2020) stated that although Islamic fund management companies do not have a comprehensive shariah governance framework, but the shariah governance process is well carried out as well as rules and guidelines by regulators are adequate to ensure shariah compliance.…”