Law and Islamic Finance: An Interactive Analysis

DeLorenzo, Yusuf Talal; McMillen, Michael J. T.

doi:10.1002/9781118390443.ch7

Cited by 14 publications

(8 citation statements)

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“…The High Court Judge granted summary judgment according to English law and held that the court was not concerned with the principles of the shariah at all, and “there could not be two separate systems of law governing the contract (i.e. Shariah law and English law)” (DeLorenzo and McMillen, 2007). It means the judgment of the case clearly state that Shariah cannot invalidate English law even though the governing law of the contract is subject to the principle of Glorious Shariah .…”

Section: Notesmentioning

confidence: 99%

Operational risk in Islamic banks: examination of issues

Abdullah

Shahimi

Ismail

2011

Qualitative Research in Financial Markets

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PurposeThe purpose of this paper is to assess key issues in measurement and management of operational risk in Malaysian Islamic banks.Design/methodology/approachDescriptive, analytical, and comparative analyses are used to discuss the issues of operational risk in Islamic bank through the implications associated with the Islamic banks' operational risk as well as the implications on risk measurement, risk management, and capital adequacy.FindingsDiscussion on operational risk in Islamic banks is significant and becoming more complicated compared with conventional banking because of the unique contractual features and general legal environment. While basic Basel II core principles of effective banking supervision apply equally well and ideally suit the Islamic banking institutions, risk measurement, and risk management practices still need specific adaptations to Islamic banks' operational characteristics. These particularities highlight the unique characteristics of Islamic banks and raise serious concerns regarding the applicability of the Basel II methodology for Islamic banks.Research limitations/implicationsThis study has important implications for the understanding of operational risk, particularly the specific issues of the Islamic banks' operational risk that arise from the different nature of the financing and investment activities of the banks. With regard to measuring operational risk capital charge, the banks have to choose the right and effective method to ensure the operational risk capital charge will be more in line with the banks' actual risk profile and thus will provide the adequate capital and an improved buffer once the losses are announced.Originality/valueThe paper will fill the gap to the existing literature of operational risk in banking institutions especially Islamic banks, by showing the needs of specific adaption of operational risk measurement and risk management practices due to the nature of Islamic banks.

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Section: Notesmentioning

confidence: 99%

Operational risk in Islamic banks: examination of issues

Abdullah

Shahimi

Ismail

2011

Qualitative Research in Financial Markets

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“…In this regard, if the parties in a contract wish to apply the principles of Sharīʿah, they can do so in their relevant contracting terms that will bind them, given that the contract itself is “the law of the land” as regards to that transaction. Here, the contract is enforceable in accordance with Sharīʿah to the extent that the Sharīʿah is incorporated in (or contains a part of) the laws of such jurisdiction (DeLorenzo et al , 2007).…”

Section: Findings and Discussionmentioning

confidence: 99%

The feasibility of adopting Islamic Banking system under the existing laws in Uganda

Lujja

Mohammad

Hassan

et al. 2016

IMEFM

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Purpose: In 2014, Islamic finance assets are estimated to have exceeded US$2 trillion with over 100 products and an annual growth of over 20.7 per cent, across more than 76 countries, most of which are members of the Organization of Islamic Cooperation (OIC). Despite this remarkable market expansion, numerous OIC members such as Uganda are yet to fully adopt this unique financial system because of regulatory constraints. Thus, the purpose of this paper is to examine the extent to which Uganda can benchmark the Malaysian experience and best practices to overcome the regulatory challenges in

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“…In most circumstances, Shariah risk does not include non-financial or non-material losses, because of Muslims’ belief that losses on the spiritual front will diminish divine blessings. Rather, Shariah risk usually falls within the circle of legal risk when there is uncertainty in interpreting Shariah clauses in courts and the possible unenforceability of Shariah contracts in secular law, a situation which naturally has a negatively effect on market discipline (DeLorenzo and McMillen, 2007; IFSB, 2007). Shariah risk is usually seen, then, as leading to legal risk.…”

Section: An Insight Into the Current View Of Shariah Riskmentioning

confidence: 99%

The derivation of Shariah risk in Islamic finance: a theoretical approach

Noor

Shafiai

Ismail³

2019

JIABR

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Purpose This paper aims to propose a derivation of Shariah risk from both the Islamic finance theory and theory of contracts in Islamic law. Specifically, it deliberates the derivation of Shariah risk following the contracts validity and apprises the readers of the Shariah risk issues currently under debate. Design/methodology/approach This study reviews the relevant literature and presents an analysis of contract rulings through evidence derived from the Qur’an, Hadith and other secondary sources of Islamic law. Various theories of Islamic finance and Islamic law of contracts are identified, to examine the general principles and essential elements and conditions of a valid contract. Findings This analysis asserts that any circumstances that may render invalidity of the contract will trigger Shariah risk. More importantly, this paper highlights the implications of invalid contracts, based on the opinion of Hanafi jurists, who concluded that Shariah risk may be derived from any void or voidable contracts due to the failure of the contractual parties to comply with Shariah contractual obligations. Research limitations/implications This paper emphasises the derivation of Shariah risk over theoretical approaches. It does not include an explanation in the form of any empirical model. Originality/value This is the first study that contributes to the field of derivation of Shariah risk, based on the theory from the Islamic law of contracts.

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Law and Islamic Finance: An Interactive Analysis

Cited by 14 publications

References 0 publications

Operational risk in Islamic banks: examination of issues

Operational risk in Islamic banks: examination of issues

The feasibility of adopting Islamic Banking system under the existing laws in Uganda

The derivation of Shariah risk in Islamic finance: a theoretical approach

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