Shariah Governance Practices in Malaysian Islamic Financial Institutions
15 Pages Posted: 17 Mar 2015
Date Written: March 16, 2015
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: Suggested Citation