SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010
Abstract: Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and management adhere to the Shariah principles and values. Failure to comply with Shariah, will expo...
| Main Authors: | , , , , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
UUM Press
2017-12-01
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| Series: | UUM Journal of Legal Studies |
| Online Access: | https://e-journal.uum.edu.my/index.php/uumjls/article/view/4642 |
| _version_ | 1797938774913581056 |
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| author | Rusni Hassan Ahmad Azam Othman Muhammad Naim Omar Mohammad Deen Mohd. Napiah Mohamad Asmadi Abdullah Mahamad Arifin Adnan Yusoff Mohd Syahmi Ab. Karim |
| author_facet | Rusni Hassan Ahmad Azam Othman Muhammad Naim Omar Mohammad Deen Mohd. Napiah Mohamad Asmadi Abdullah Mahamad Arifin Adnan Yusoff Mohd Syahmi Ab. Karim |
| author_sort | Rusni Hassan |
| collection | DOAJ |
| description | Abstract: Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and management adhere to the Shariah principles and values. Failure to comply with Shariah, will expose Islamic Financial Institutions (IFIs) to Shariah non-compliance risk. Subsequently, it is an essential duty of the IFIs to manage Shariah risk properly. In order to effectively manage the risk vulnerability of the IFIs, proper measures for risk management have been put in place in different frameworks that are either domestic or international based. In the Malaysian context, IFIs are guided by relevant regulations such as the Shariah Governance Framework 2010, IFSB principles and Islamic Financial Services Act 2013 with regards to Shariah risk management. This research examined the regulatory requirements of the Shariah risk management process for Islamic financial institutions that operate in Malaysia, in the context of the Guidelines on Shariah Governance Framework 2010 issued by the Central Bank of Malaysia. The paper discusses the concept of “riskâ€, “Shariah risk†and “Shariah non-compliant risk†in the context of Islamic Financial Institutions and also examines the process adopted by the Malaysian IFIs in managing the Shariah risk. The hypotheses that the paper seeks to establish are that there are differences between the concept of Shariah risk and Shariah non-compliant risk; and that the Shariah risk management process adopted by the IFIs are different than the conventional risk management process due to the unique features and requirements of the IFIs.
Keywords: Shariah, Risk management, Islamic Financial Institutions.
Abstrak: Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risikoâ€, “risiko Syariah†dan “risiko tidak patuh Syariah†dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI.
Kata kunci: Syariah, Pengurusan risiko, Institusi Kewangan Islam. |
| first_indexed | 2024-04-10T19:06:02Z |
| format | Article |
| id | doaj.art-d466c7f832b5489093131f347e2d38ec |
| institution | Directory Open Access Journal |
| issn | 2229-984X 0127-9483 |
| language | English |
| last_indexed | 2024-04-10T19:06:02Z |
| publishDate | 2017-12-01 |
| publisher | UUM Press |
| record_format | Article |
| series | UUM Journal of Legal Studies |
| spelling | doaj.art-d466c7f832b5489093131f347e2d38ec2023-01-31T03:12:05ZengUUM PressUUM Journal of Legal Studies2229-984X0127-94832017-12-018SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010Rusni Hassan0Ahmad Azam Othman1Muhammad Naim Omar2Mohammad Deen Mohd. Napiah3Mohamad Asmadi Abdullah4Mahamad Arifin5Adnan Yusoff6Mohd Syahmi Ab. Karim7International Islamic University MalaysiaInternational Islamic University MalaysiaInternational Islamic University MalaysiaInternational Islamic University MalaysiaInternational Islamic University MalaysiaInternational Islamic University MalaysiaUnknownUnknownAbstract: Shariah compliance is the backbone of Islamic banks. As an institution established within the ambit of Shariah, Islamic banks are expected to ensure that their aims, activities, operations and management adhere to the Shariah principles and values. Failure to comply with Shariah, will expose Islamic Financial Institutions (IFIs) to Shariah non-compliance risk. Subsequently, it is an essential duty of the IFIs to manage Shariah risk properly. In order to effectively manage the risk vulnerability of the IFIs, proper measures for risk management have been put in place in different frameworks that are either domestic or international based. In the Malaysian context, IFIs are guided by relevant regulations such as the Shariah Governance Framework 2010, IFSB principles and Islamic Financial Services Act 2013 with regards to Shariah risk management. This research examined the regulatory requirements of the Shariah risk management process for Islamic financial institutions that operate in Malaysia, in the context of the Guidelines on Shariah Governance Framework 2010 issued by the Central Bank of Malaysia. The paper discusses the concept of “riskâ€, “Shariah risk†and “Shariah non-compliant risk†in the context of Islamic Financial Institutions and also examines the process adopted by the Malaysian IFIs in managing the Shariah risk. The hypotheses that the paper seeks to establish are that there are differences between the concept of Shariah risk and Shariah non-compliant risk; and that the Shariah risk management process adopted by the IFIs are different than the conventional risk management process due to the unique features and requirements of the IFIs. Keywords: Shariah, Risk management, Islamic Financial Institutions. Abstrak: Pematuhan Syariah adalah tulang belakang bank Islam. Sebagai sebuah institusiyang ditubuhkan dalam bidang Syariah, bank Islam dijangka memastikan bahawa matlamat, aktiviti, operasi dan pengurusan mereka mematuhi prinsip dan nilai Syariah. Kegagalan mematuhi Syariah, akan mendedahkan Institusi Kewangan Islam (IFIs) kepada risiko ketidakpatuhan Syariah. Selepas itu, adalah tanggungjawab penting IFI untuk menguruskan risiko Syariah dengan betul. Untuk mengatasi kelemahan risiko IFI secara berkesan, langkah-langkah yang sewajarnya untuk pengurusan risiko telah dilaksanakan dalam rangka kerja yang berbeza sama ada di dalam negeri atau antarabangsa. Dalam konteks Malaysia, IFI dipandu oleh peraturan yang berkaitan seperti Rangka Kerja Tadbir Urus Syariah 2010, prinsip IFSB dan Akta Perkhidmatan Kewangan Islam 2013 berkaitan dengan pengurusan risiko Syariah. Kajian ini mengkaji keperluan pengawalseliaan proses pengurusan risiko Syariah untuk institusi kewangan Islam yang beroperasi di Malaysia, dalam konteks Garis Panduan mengenai Rangka Tadbir Urus Syariah 2010 yang dikeluarkan oleh Bank Negara Malaysia. Makalah ini membincangkan konsep “risikoâ€, “risiko Syariah†dan “risiko tidak patuh Syariah†dalam konteks Institusi Kewangan Islam dan juga mengkaji proses yang diterima pakai oleh IFI Malaysia dalam menguruskan risiko Syariah. Hipotesis ini bertujuan untuk melihat perbezaan antara konsep risiko Syariah dengan risiko tidak patuh Syariah; dan proses pengurusan risiko Syariah yang diterima pakai oleh IFIs adalah berbeza daripada proses pengurusan risiko konvensional disebabkan oleh ciri-ciri unik dan keperluan IFI. Kata kunci: Syariah, Pengurusan risiko, Institusi Kewangan Islam.https://e-journal.uum.edu.my/index.php/uumjls/article/view/4642 |
| spellingShingle | Rusni Hassan Ahmad Azam Othman Muhammad Naim Omar Mohammad Deen Mohd. Napiah Mohamad Asmadi Abdullah Mahamad Arifin Adnan Yusoff Mohd Syahmi Ab. Karim SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 UUM Journal of Legal Studies |
| title | SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 |
| title_full | SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 |
| title_fullStr | SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 |
| title_full_unstemmed | SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 |
| title_short | SHARIAH RISK MANAGEMENT PROCESS FOR ISLAMIC FINANCIAL INSTITUTIONS IN THE CONTEXT OF SHARIAH GOVERNANCE FRAMEWORK 2010 |
| title_sort | shariah risk management process for islamic financial institutions in the context of shariah governance framework 2010 |
| url | https://e-journal.uum.edu.my/index.php/uumjls/article/view/4642 |
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