Comparative Analysis on Shariah Governance in Malaysia: SGF 2010, IFSA 2013 and SGPD 2019

Kamaruddin, Muhammad Iqmal Hisham; Hanefah, Mustafa Mohd; Shafii, Zurina; Salleh, Supiah; Zakaria, Nurazalia

doi:10.5296/jpag.v10i1.16157

Cited by 14 publications

(18 citation statements)

References 3 publications

(3 reference statements)

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“…Further, the Shariah Governance Policy Document (SGPD) that was issued in September 2019, improves the Shariah governance in Malaysia by emancipating the role of the Shariah Committee, the board of directors and other key units involved in Shariah governance (Kamaruddin et al , 2020). It may also prevent the above financial frauds in several ways.…”

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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“…For instance, Ramli et al (2015) opined that Islamic governance is within the domain of conventional governance. However, it is argued that the scope of Islamic governance exceeds conventional governance where Islamic governance includes the additional requirement of complying with the shariah (Islamic law) (Kamaruddin et al , 2020). This additional requirement is supposed to be practised by Islamic-based organisations including waqf institutions.…”

Section: Waqf Governancementioning

confidence: 99%

An empirical investigation on waqf governance practices in waqf institutions in Malaysia

Kamaruddin

Hanefah

2021

JFRA

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Purpose This study aims to examine and compare the current waqf governance practices in waqf institutions in Malaysia. Design/methodology/approach This paper reviews professional documents and literature to propose a new and practical waqf governance measurement. Waqf governance measurements were used to examine and compare the current waqf governance practices among waqf institutions in Malaysia. The annual reports of all waqf institutions under the State Islamic Religious Councils (SIRCs) were analysed using content analysis on the current waqf governance practices using binomial logic. Findings Overall, the results indicate moderate waqf governance practices under three waqf governance categories, namely waqf governance policy, waqf governance board and waqf governance processes. This study also found a significant impact of corporatisation reformation of waqf institutions on waqf governance practices. Research limitations/implications The findings indicate the need for all waqf institutions in Malaysia, especially for non-corporate waqf institutions, to enhance their waqf governance practices by disclosing all relevant information to the public. This is because the success of waqf fund management can be portrayed through the management’s transparency in waqf governance practices on how they deliver and use their resources to attain socio-economic objectives. Originality/value To the best of the authors’ knowledge, this study is among the first studies that examined and evaluated the current waqf governance practices in several waqf institutions in Malaysia.

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“…By implementing SGPD 2019, IFIs are expected to establish a strong Sharīʿah-compliance risk department. The BOD, SC and senior management of IFIs are now expected to be responsible and accountable in discharging their duties (Kamaruddin et al, 2020). Based on the previous SGF 2011, the SC is required to report to the BOD on Sharīʿah matters.…”

Section: Governance Mechanismsmentioning

confidence: 99%

“…The findings on Sharīʿah non-compliant events shall be documented by the IFIs for the auditors to review during the auditing period. However, in the SGPD 2019, these four Sharīʿah functions have become only three; the Sharīʿah research function is combined with the secretariat in the SC function and is no longer classified under the control function (Kamaruddin et al, 2020). Furthermore, the SGPD 2019 Part E strongly encourages IFIs to have robust Sharīʿahcompliance functions, comprising risk management, review and audit functions (BNM, 2019).…”

Section: Governance Mechanismsmentioning

confidence: 99%

Internal control, risk and Sharīʿah non-compliant income in Islamic financial institutions

Hanefah

Kamaruddin

Salleh

et al. 2020

IJIF

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Purpose The existence of internal control for Sharīʿah-compliance promotes reasonable assurance that the Islamic financial institution’s (IFI’s) objectives are achieved in the following categories, namely, the effectiveness and efficiency of operations, the reliability of financial reporting and the level of compliance with applicable laws and regulations, as well as accounting and auditing standards. Sharīʿah non-compliant income (SNCI) is an important issue in IFIs’ operations. Thus, the purpose of this paper is to identify issues related to governance and internal control of SNCI in selected IFIs in Malaysia. Design/methodology/approach This research uses a case study approach to gather data on the measures of governance and risk management in relation to the internal control for SNCI in IFIs. Interviews were conducted with officers of the Sharīʿah and internal audit departments on internal control practices regarding SNCI. Findings Regulator’s guidelines on SNCI are simple and brief, lacking rigour in terms of governance, risk management and audit procedures. The section on SNCI is only a brief statement within the Bank Negara Malaysia’s Guidelines on Financial Reporting for Islamic Banking Institutions and also in the Operational Risk Integrated Online Network system operated by IFIs. Most of the respondents in the interviews suggested that there should be a proper guideline in determining the classification of SNCI. Second, although IFIs have established the purification account to manage SNCI, the real practice varies from one IFI to another. Third, although there are supposedly documented procedures established in relation to management and administration of SNCI, the following events still occur in practice, namely, no authorisation from the Sharīʿah Committee (SC) on various types of income channelled to the SNCI account; unauthorised use of SNCI for other purposes; SNCI not being reported in the annual financial reports; and distribution of SNCI prior to obtaining the SC’s consent. Fourth, there is an absence of Sharīʿah risk assessment conducted on operational risk by IFIs to identify any potential Sharīʿah non-compliant event. Research limitations/implications This research contributes to the importance of Islamic corporate governance theory and Sharīʿah risk management, as well as strengthening the case for reporting SNCI to shareholders. It also contributes to the body of knowledge on the capability of the management in managing the internal control system of IFIs’ SNCI. Originality/value A new internal control assessment matrix is proposed for Sharīʿah-compliance in IFIs.

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Comparative Analysis on Shariah Governance in Malaysia: SGF 2010, IFSA 2013 and SGPD 2019

Cited by 14 publications

References 3 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?

An empirical investigation on waqf governance practices in waqf institutions in Malaysia

Internal control, risk and Sharīʿah non-compliant income in Islamic financial institutions

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