Shariah Governance Practices in Malaysian Islamic Financial Institutions

15 Pages Posted: 17 Mar 2015

See all articles by Zulkarnain Muhamad Sori

Zulkarnain Muhamad Sori

INCEIF, The Global University of Islamic Finance

Shamsher Mohamad

University Putra Malaysia - Graduate School of Management

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF)

Date Written: March 16, 2015

Abstract

The Central Bank of Malaysia (Bank Negara Malaysia or BNM) introduced the Shariah Governance Framework (SGF) in 2010 and required all Islamic Financial Institutions (IFIs) to fully implement in 2011. The objective is to provide a proper regulatory framework for IFIs to function within the required Sharia framework that will help further strengthen the international investor confidence in the fast growing Islamic Finance Industry in the country. However, to realize this objective, the IFIs must ‘buy-in’ and provide the necessary infrastructure to effectively implement the requirements of the framework. This paper deliberates on the level of commitment and implementation of the requirements of the framework by IFIs in the country, and highlights the success factors, challenges and suggestions for effective implementation of this framework.

Sixteen Shariah committee members from 16 different IFIs were interviewed on the issues of interest and the findings suggest that IFIs perceive that SGF is not only relevant but necessary to ensure that Shariah committees to keep the gates on the IFIs business operations. It has provided an avenue for Shariah experts to actively participate in the Shariah Risk Management Control Function, Shariah Review Function, Shariah Research Function and Shariah Audit Function.

Keywords: Shariah Governance Framework, Banking, Director, Risk Management, Audit

JEL Classification: K20, K22, L21, M10, M14, M40

Suggested Citation

Muhamad Sori, Zulkarnain and Mohamad, Shamsher and Shah, Mohamed, Shariah Governance Practices in Malaysian Islamic Financial Institutions (March 16, 2015). Available at SSRN: https://ssrn.com/abstract=2579174 or http://dx.doi.org/10.2139/ssrn.2579174

Zulkarnain Muhamad Sori (Contact Author)

INCEIF, The Global University of Islamic Finance ( email )

Lorong Universiti A
Kuala Lumpur, Kuala Lumpur 59100
Malaysia
+60376514173 (Phone)
8 (Fax)

HOME PAGE: http://www.inceif.org/

Shamsher Mohamad

University Putra Malaysia - Graduate School of Management ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF) ( email )

Kuala Lumpur
Malaysia

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1,223
Abstract Views
3,805
rank
17,015
PlumX Metrics