The derivation of <i>Shariah</i> risk in Islamic finance: a theoretical approach

Noor, Nurul Syazwani Mohd; Shafiai, Muhammad Hakimi Mohd; Ismail, Abdul Ghafar

doi:10.1108/jiabr-08-2017-0112

Cited by 13 publications

(5 citation statements)

References 17 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…when the issuer breaches its fiduciary duty to ensure Shariah compliance. In a similar vein, it was noted in a study that the risk is also associated with “governance” and “personnel” (Mohd Noor et al , 2019). In the study, they found that past literature has frequently associated the risk with the IFIs’ internal system/governance and conduct of the IFIs personnel.…”

Section: Literature Reviewmentioning

confidence: 55%

“…In addition, it was also noted that SNCR may also be associated with invalidation of contract. In other words, when the contract is invalid, SNCR may arise to the extent of which the contract contravenes the Shariah principles (Mohd Noor et al , 2019). However, unlike the study by Naim (2013) and Tariq (2004), other studies have approached SNCR as risk within a wider scope of Islamic finance and not restricted to sukuk.…”

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Shariah non-compliance risk and its management techniques: empirical evidences in selected wakalah sukuk documents issued in Malaysia jurisdiction

Mohd Noor

2024

QRFM

View full text Add to dashboard Cite

Purpose This study aims to investigate the extent of Shariah compliance in wakalah sukuk and Shariah non-compliant risk disclosure in the sukuk documents and to analyse the risk management techniques associated with the disclosed risks. Design/methodology/approach This study uses qualitative document analysis as both data collection and analysis methods. The document analysis acts as a data collection method for 23 wakalah sukuk documents selected from 32 issuances of wakalah sukuk from 2017 to 2021. These sukuk documents were selected based on their availability from relevant websites. Document analysis, both content analysis and thematic analysis, were used to analyse the data. Codes were grounded from that data through keywords search of Shariah noncompliant risk and its risk management. Besides these, interviews were also conducted with four active industry players, i.e. two legal advisors of wakalah sukuk, a wakalah sukuk trustee and a sukuk institutional issuer. These interview data were analysed based on categorical themes, on the aspects of the extent of Shariah compliance in sukuk, and the participant’s views on the risk management techniques associated with the risks or used in the sukuk documents. Findings Overall, the findings reveal three types of Shariah non-compliant risks disclosed in the sukuk documents and seven risk management techniques associated with them. However, the disclosure and the risk management techniques can be considered minimal in contrast to the extent of Shariah compliance in a sukuk, i.e. Shariah compliance at the pre-issuance stage, ongoing stage and post-issuance stage. On top of these, it was also found from the interviews that not all risk management techniques are workable to manage Shariah non-compliant risk in sukuk. As a result, these findings suggest rigorous reviews of the existing Shariah non-compliance risk (SNCR) disclosures and risk management techniques by the relevant parties. Research limitations/implications Sukuk documents used in the study are limited to corporate wakalah sukuk issued in Malaysia. Out of 32 issuances from 2015 to 2021, only 23 documents are available in relevant website. Thus, Shariah non-compliant risk disclosure and its risk management techniques analysed in this study are only limited in those documents. Practical implications The findings of this study suggest rigorous reviews on the existing Shariah non-compliance disclosures and risk management techniques. Other than these, future research in relation to uncommon risk management clauses, i.e. assurance, Shariah waiver and transfer of risk, are needed. Originality/value The insights presented in the analysis are of importance to sukuk issuers and the sukuk due diligence working group in enhancing the sukuk Shariah compliance and Shariah non-compliant risks disclosure and towards sukuk investors, in capturing and assessing Shariah non-compliant risks in a sukuk and to assist them to make informed investment decisions. More importantly, this study has found few areas of future study in relation to SNCR disclosures and SNCR risk management techniques.

show abstract

Section: Literature Reviewmentioning

confidence: 55%

Section: Literature Reviewmentioning

confidence: 99%

Shariah non-compliance risk and its management techniques: empirical evidences in selected wakalah sukuk documents issued in Malaysia jurisdiction

Mohd Noor

2024

QRFM

View full text Add to dashboard Cite

show abstract

“…Previous studies have laid the groundwork for understanding the historical and legal foundations of contractual liability in Saudi Arabia. Research has highlighted the influence of Sharia principles on contractual relationships (Mohd-Noor et al, 2019;Aljifri & Kumar Khandelwal, 2013). Scholars have emphasized concepts of justice, fairness, and good faith as fundamental to limiting liability in commercial contracts.…”

Section: Theoretical Framework and Previous Studiesmentioning

confidence: 99%

Historical Background on the Limitation of Liability in Saudi Arabia

Aljaser,

Meskic

2024

IJSR

View full text Add to dashboard Cite

This qualitative study explores the evolution and implications of limiting contractual liability in Saudi Arabia, focusing on the interplay between Sharia principles, international conventions, and domestic legal reforms. Through a comprehensive analysis of primary and secondary sources, including the new Civil Transactions Law 2023 and relevant legal documents, the research aims to thoroughly understand the historical roots and contemporary dynamics shaping contractual practices in Saudi Arabia. The study uncovers the challenges and opportunities inherent in harmonizing Sharia principles with global legal norms within the Saudi legal framework. Examining the new legislation reveals notable changes in the treatment of liability in commercial contracts, signaling a shift towards modernization and alignment with international standards. Its findings highlight the complexities of balancing contractual autonomy with legal constraints in the Saudi context, emphasizing the need for ongoing dialogue and research to address emerging issues and enhance the clarity and enforceability of contractual agreements. The study underscores the importance of a collaborative approach that integrates legal, cultural, and international perspectives to strengthen the legal framework and foster a conducive environment for commercial transactions in Saudi Arabia. In doing so, it offers a nuanced analysis of the legal landscape, shedding light on stakeholders' challenges and opportunities in navigating contractual practices within the Kingdom of Saudi Arabia.

show abstract

“…In Islamic finance, fulfilling a contractual duty entails the contracting parties adhering to the contract's terms and conditions in order for the contract to be legitimate transactions. Failure to comply with Shari'ah contractual duties will, of course, result in legal consequences whereby the contracting parties may have to consider executed contracts as void (Noor et al, 2019).…”

Section: Shari'ah Riskmentioning

confidence: 99%

The Influence of Islamic Governance Disclosure on Islamic Bank’s Financial Performance in Malaysia

Abdul Rahim,

Saadin,

Mohd Tamrin

2023

IJARAFMS

View full text Add to dashboard Cite

The influence of Islamic governance disclosure on Islamic banking financial performance in Malaysia is investigated in this study. Islamic banking is gaining popularity as a result of its ability to meet the needs of specific customers. However, as Islamic banking has grown, various new risks have evolved, such as the Shari'ah non-compliance risk. Such occurrences are due to a lack of oversight, control, and disclosed information, particularly in non-compliant matters. Every action, transaction, and procedure carried out by an Islamic bank should be compliant with the Shari'ah laws. These issues include incomplete disclosure of information, lax oversight, and weak governance, all of which influence businesses. The goal of this study is to determine the extent of influence the disclosure of Shari'ah governance has had on the financial performance of Islamic banks. This study used a sample size of 16 Islamic banks and is concentrated on Malaysia. Using a checklist created from the Shari'ah governance framework, secondary data is used and collected from yearly reports for the years 2017 through 2021. The checklist consists of five methods that are crucial for ensuring Shari'ah compliance and highquality transparency in Islamic banking. The method used to gauge financial performance is the return on assets (ROA). In response to the research topic, this study also performed multiple regression analysis. According to this study, the only factors that significantly affect financial performance are the Shari'ah Committee and Shari'ah Risk. Both these processes are crucial in guaranteeing Islamic banking compliance in Malaysia.

show abstract

The derivation of Shariah risk in Islamic finance: a theoretical approach

Cited by 13 publications

References 17 publications

Shariah non-compliance risk and its management techniques: empirical evidences in selected wakalah sukuk documents issued in Malaysia jurisdiction

Shariah non-compliance risk and its management techniques: empirical evidences in selected wakalah sukuk documents issued in Malaysia jurisdiction

Historical Background on the Limitation of Liability in Saudi Arabia

The Influence of Islamic Governance Disclosure on Islamic Bank’s Financial Performance in Malaysia

Contact Info

Product

Resources

About