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Shariah Governance: Challenges Ahead

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  • Abdul Aziz, Ahmad Faizal
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    Abstract

    Bank Negara Malaysia (BNM) had previously issued a number of statutory requirements in making the establishment of Shariah Committee (SC) of a bank mandatory via Islamic Banking Act 1983, Banking & Financial Institution Act 1989, Takaful Act 1984 and Central bank of Malaysia (Amendment) Act 2003. The establishment of SC is important as part of the governance of an Islamic Bank in order to assure the stakeholders that the Bank is doing its business in permissible manner as outlined by the Shariah. Despite the structure, there is still skepticism about the system mainly on the capacity and the capability of the SC as reported in previous publications. This paper shall identify challenges faced by the SC that had impaired their capacity and capability in achieving their objectives. Subsequently, this paper shall recommend alternative measures on issues highlighted in assisting the SC and Shariah Auditors in bridging the public expectations. This study confines to issues pertaining to Islamic Banks operating in Malaysia as published in relevant articles and the author’s personal encounter.

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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47772.

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    Date of creation: May 2012
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    Handle: RePEc:pra:mprapa:47772

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    Related research

    Keywords: Islamic Finance; Shariah Governance; Shariah Committee; Shariah Audit;

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    1. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June.
    2. Iqbal, Zamir & Mirakhor, Abbas, 2004. "Stakeholders Model of Governance in Islamic Economic System," MPRA Paper 56027, University Library of Munich, Germany.
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