Why does Shariah governance framework important for Islamic banks?

Alam, Md. Kausar; Islam, Fakir Tajul; Runy, Mahfuza Kamal

doi:10.1108/ajeb-02-2021-0018

Cited by 30 publications

(28 citation statements)

References 54 publications

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“…Several studies have shown Shariah corporate governance's urgency in preventing fraud (Ghoniyah and Hartono, 2020; Yusmansyah et al , 2020; Alam et al , 2021). Shariah compliance and profit distribution management are two key factors in reducing fraud in Islamic banks (Ghoniyah, Mutamimah and Amilahaq, 2020).…”

Section: Findings and Discussionmentioning

confidence: 99%

Can fraud in Islamic financial institutions be prevented using high standards of shariah governance?

Swandaru

Muneeza

2022

IJLMA

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Purpose This study aims to scrutinize the modus operandi of global financial frauds in Islamic financial institutions and assesses whether those frauds can be prevented using High Standards of Shariah Governance. Design/methodology/approach A qualitative research methodology is deployed to conduct this study by analyzing and scrutinizing academic journals, reports, regulatory guidelines and articles. Findings The findings in this study show that the modus operandi ranges from bribery, forged documents, unlawful profiteering, credit limit allowance ignorance, Ponzi scheme, culprit collaboration from inside and outside the banks. This paper also argues that the centralized and high-standard Shariah governance framework better prevents fraud by providing better Shariah supervision and risk management measures. Research limitations/implications The observations in this study are limited to financial fraud at Islamic financial institutions that happened in the 21st century with more than $100m in financial loss or penalty. Originality/value This study may contribute significantly by providing insight for regulators to strengthen the Shariah governance framework in their respective countries. It also benefits Islamic financial institutions by enhancing their capacity to anticipate future financial fraud.

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Section: Findings and Discussionmentioning

confidence: 99%

Can fraud in Islamic financial institutions be prevented using high standards of shariah governance?

Swandaru

Muneeza

2022

IJLMA

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“…“SG as a process of confirming Shariah compliance in the overall functions of the Islamic banks” (Alam et al , 2021a, 2021b, p. 158). In addition, Alam et al (2021a, 2021b, p. 158) stated that “SGF is important for Islamic banks to implement Shariah principles, confirm Shariah compliance and monitor the functions of the banks.” However, the SGF is diversified and varied from county to country, framework to framework because of the socio-cultural and political situations and circumstances (Hassan et al , 2011). The world SG practices are seen in three types practiced by Islamic finance such as centralized SGF, decentralized or laissez-faire and hybrid.…”

Section: Literature Reviewmentioning

confidence: 99%

“…To solve these problems, most of the researchers put the strength on the development of homogeneous SG guidelines and suggested setting up a centralized Shariah supervisory board (CSSB) within the central bank (Alam and Miah, 2021; Alam et al , 2021a, 2021b; Alam et al , 2020a, 2020b, 2020c, 2020d; Alam et al , 2019; Noman et al , 2017; Perves, 2015; Ullah, 2014; Ahmad et al , 2014). Moreover, several studies have highlighted the benefits of homogeneous guidelines or a CSGF for the Islamic banking industry in Bangladesh rather than providing a structure of CSGF.…”

Section: Introductionmentioning

confidence: 99%

A proposed centralized Shariah governance framework for Islamic banks in Bangladesh

Alam

2021

JIABR

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Purpose The purpose of this study is to propose a centralized Shariah governance framework (CSGF) for the Islamic banks and Shariah governance in Bangladesh as such, the existence and practices of the Shariah governance framework (SGF) are decentralized and diversified. Design/methodology/approach The paper implements a qualitative case study approach to develop a CSGF for the Islamic banks in Bangladesh. The data has been collected from 17 respondents through semi-structured interviews with a combination of regulators, Shariah supervisory board members, Shariah department executives and Shariah experts from the central bank and Islamic banks in Bangladesh. Findings This study proposes a CSGF which is comprising two-tier Shariah supervisory boards (SSBs), i.e. institutional SSB and centralized Shariah supervisory board (CSSB) under the central bank to monitor the overall functions of SG. The study recommends the setting up of four departments under the central bank to enhance the functions of CSSB. Besides, the central bank can introduce Shariah rating, external Shariah audit and external Shariah review through Islamic rating agencies and Islamic Chartered Accountant Firms for transparency and quality compliance which are more desired from the public and other stakeholders. Research limitations/implications The study significantly contributed to the national and global regulatory bodies by providing a structural CSGF for the Islamic banks to perform their functions and activities smoothly. Practical implications The study outlines a CSGF for the Islamic banks in Bangladesh as the existing practices are diversified and decentralized. Therefore, this framework would be helpful for the central bank and Islamic banks in Bangladesh to promote unique practices of the SGF. Originality/value This is the first research that provides a structure of CSGF for Islamic banks in Bangladesh, while the central bank of Malaysia developed the first SGF. There is no study concerning the demographic figure of CSGF of Islamic banks in the entire literature.

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“…The success of an organization, particularly Islamic banks, is subject to the preparedness of the administration to endorse and essentially enact Islamic principles in the operation of the organization. Equally, [43] emphasized the role of the BOD in guaranteeing the adequate implementation of the SG. [61] examined the significance of SG of the Islamic banks and emphasized similarities between traditional banks and Islamic banks.…”

Section: Board Of Directorsmentioning

confidence: 99%

Shariah Governance in Islamic Financial Institutions in Nigeria: An Empirical Study

Mahmud¹,

AbdulKareem²,

Ali³

et al. 2021

Advances in Economics, Business and Management Research

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This study examines the elements of Shariah governance in Islamic financial institutions in Nigeria. In this study, a quantitative research method is utilized to gather data via a survey approach using questionnaires. The data were acquired from members of ACE, SAs, academia, religious preachers, banks customers and banks auditor in Nigeria. The outcome of the study demonstrated that the Advisory Committee of Experts, and Board of Directors have a positive significant relationship with Shariah governance of the Islamic financial institutions. Furthermore, this study found Executive Management to have a negative significant relationship with Shariah governance. However, the outcome of the study demonstrated that the Shariah audit has a negative insignificant relationship with Shariah governance. This study shows that Shariah governance of Islamic financial institutions needs to work in coordination with the Board of Directors, Executive Management, and Advisory Council of Experts to achieve the obejective of Islamic finance and Shariah compliance in every product and service. Therefore, the result of the study may assist practitioners and users in recognising the elements that influence Shariah governance as the backbone of Islamic finance in Nigeria. Also, the study contributes to non-interest banks by confirming the elements of the Shariah governance that may impacts the development and growth of non-interest banks in the country.

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Why does Shariah governance framework important for Islamic banks?

Cited by 30 publications

References 54 publications

Can fraud in Islamic financial institutions be prevented using high standards of shariah governance?

Can fraud in Islamic financial institutions be prevented using high standards of shariah governance?

A proposed centralized Shariah governance framework for Islamic banks in Bangladesh

Shariah Governance in Islamic Financial Institutions in Nigeria: An Empirical Study

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