Remarkable differences in Islamic financial agreements, 487 words essay example
Laldin et al. (2012) have found that there are remarkable differences in Fatwas towards Islamic banking products in GCC countries and Malaysia as follows There is 100% difference in Fatwa resolved by the respected Fatwaissuing bodies in the Middle East and Malaysia in relation to three Shariah principles, namely Innah, kafalah bi alajr, and stipulation of Ibra in the contract. Also there is 20% difference regarding the Tawarruq contract. Likewise, the 20% difference in the case of Tawarruq signifies that only one Fatwaissuing body in the Middle East has a different opinion from that of Malaysia.
All the guidelines are not comprehensive enough, for instance, while IFSB defines the Shariah governance, AAOIFI and BNM do not do and when BNM discusses on the Shariah risk management and research functions, the other two guidelines are silent. Thus, we would like to suggest that we should have one standardized and comprehensive guideline or framework so that it will be the easy reference for the industrial players, regulators, Shariah advisors and investors (NawalKasim et al., 2013)
According to Laldin, Khir, & Parid (2012)all Islamic financial arrangements in Malaysia must be Shariahcompliant in their entirety while, in GCC countries, conventional banks can raise funds to recapitalize Ribabased institutions or utilize the funds for activities which may not necessarily comply with Shariah investment criteria.
In the term of diversity in product offering, it seems Malaysia Islamic banks have more products offered. In this case Malaysia Islamic banks are more progressive to conventional bankers and more efficient but yet too liberal to GCC scholars. For example, the Accepted Billsi (ABi) which was previously known as Islamic Accepted Bills (IAB) were introduced in 1991. The ABi is formulated based on the Shariah concepts of Murabahah (costplus) and Bai dayn (debt trading) (Islamic Banking and Takaful Department, 2007). In Malaysia Bay alDayn can be allowed was based on the views of some of the Islamic jurists who allowed the use of this concept subject to certain conditions (Hussin, 2010), if the instrument is sold at par to issuer, but not at discount to the party and first party. (Bahari, 2009) however, AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) does not provide any standards for these two contracts (Hussin, 2010). Therefore, regardless to the quality in the term of complaint with Shariah rules, we can say less Islamic products are introduced in countries of GCC compared to their counterpart.
Syed Farhan et al. (2012) stressed that in Jordan a prominent Muslim scholar criticized the penalty imposed by the Islamic banks in case of client default in Murabaha and declares that it is a kind of Riba. However, BNM mentioned that (Bank Negara Malaysia, 2009) the Islamic financial institutions may include a clause in the Murabahah contract, stipulating a compensation for late payment as determined by the relevant authorities, which is claimable by the IFI from the customer as income. Alternatively, the IFI may include a clause stipulating late payment penalty which shall be channeled to charity.
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