Shari’ah compliance in Islamic banking

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to evaluate the Shari'ah compliance status of the Islamic banks in Bangladesh. Design/methodology/approach -The research was based on both primary and secondary materials. The primary data were gathered through sample questionnaire survey and personal interviews by the researcher; the secondary data were obtained from Qur'an, Hadiths, different circulars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks. Statistical tools and techniques like weighted average, percentage, SD, variance and correlation between Shari'ah violation score and bank-specific attributes were used applying statistical software Statistical Package for Social Science (version 17.0). Findings -Shari'ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition, Shari'ah compliance status highly varies among the Islamic banks, and Shari'ah violation is high in investing activities because of lack of knowledge, lack of sincerity in complying Shari'ah, poor attention in Shari'ah audit and Shari'ah research and lack of strong Shari'ah supervisory board comprising full-time skillful members. Practical implications -Among others, the major policy implications of this study are as follows: regulatory bodies and Shari'ah board members are expected to have guidelines from this study to find their limitations and to determine their future responsibilities; executives and Employees are expected to get the idea of present state of Shari'ah compliance and to identify their weaknesses in this regard; clients and other stakeholders are expected to have guidelines to choose the better Islamic banks to perform banking transactions; and the researchers in Islamic banking may usefully use the issues raised in this article for more comprehensive studies in Islamic banking and Shari'ah compliance. Originality/value -The paper opens a new avenue in justifying the status of Shari'ah compliance with a new dataset and correlating Shari'ah violation score with bank-specific attributes.

Reference to Shari’ah Advisory Council in Islamic finance: Effect of Changes to the Stakeholders

“…Hafij Ullah (2014) found that on an average 76.05 per cent strongly agreed and 22.16 per cent of the Islamic bank employees in Bangladesh agreed that Islamic bank provide first priority is Shari'ah compliance in performing all transactions of the Islamic banks. However, he concluded that government rules and regulations, Bangladesh Bank's rules and regulations and interest-based economy of Bangladesh are impediments to Shari'ah compliance by the Islamic banks in Bangladesh.…”

Islamic Prudential Banking Concept to Reduce Non Performing Financing: Literature Review

“…This condition also occurs in Bangladesh. According to Ullah (2014) that the status of shariah compliance from Islamic banks in Bangladesh is in a vulnerable condition, the status of shariah compliance varies greatly among Islamic banks, and Shariah violations are high in investment activities due to lack of knowledge, lack of sincerity in fulfilling Shariah, poor attention in the Shariah audit and Shariah research as well as the lack of a strong shariah supervisory board consisting of full-time skilled members. Compliance with the prudence in providing financing in the form of 5 C according to Abubakar and Handayani (2017) is to ensure that banks fulfill their obligations to pay their obligations.…”

The Practice of Shariah Governance in Islamic Banking and Finance: A Study of Islamic Banks in Bangladesh

“…In Indonesia for example, all Islamic Banks are required to have a Shariah board. Sole (2007) (Ullah, 2014) and most of them do not conform to the Shariah principles of keeping customers as partners in profit or loss (Chowdhury et al 2016).…”

“…In a survey of 334 personnel of the Islamic banks in Bangladesh, the majority of the research respondents (88%) considered the interest-based economy of Bangladesh as one of the major impediments to Shariah compliance (Ullah, 2014). Although Bangladesh Bank gives preferential treatment to IFIs in terms of liquidity, the central bank adheres to economic orthodoxy.…”

“…A UK-based professional body, Chartered Institute of Management Accountants (CIMA), offers an Islamic finance course in Bangladesh. Nevertheless,Ullah (2014) found that many managers of IFIs in Bangladesh were not well trained regarding Islamic finance.…”