Islamic financial institutions (IFIs) are required to establish a Shari'ah Governance Framework (SGF) to strengthen their Shari'ah compliance mechanism and ensure that all relevant IFI regulations are in line with Shari'ah rules and principles. Effective implementation of the Shari'ah-compliance function will further promote stakeholder confidence, as well as the integrity of IFIs, by reducing Shari'ah non-compliance risks. This study aims to examine the internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and explore the extent to which it can be incorporated in the Shari'ah-compliance function of IFIs. This study adopts a qualitative method of inquiry, utilizing the inductive method and content analysis to build comprehensive knowledge that will assist in exploring the framework of COSO methodology and the extent to which it can be adopted by IFIs. The findings indicate that the existing frameworks of Shari'ah governance, whether that of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) or Bank Negara Malaysia (BNM), need to be further developed. Therefore, the adoption of COSO methodology in the internal Shari'ah audit of IFIs, as suggested by AAOIFI, is not only possible but desirable. The study also finds that the COSO framework places the highest priority on risk management in that it makes it an integral part of the decision making process in all the institution's activities. As a result, incorporating the comprehensive COSO risk management structure within the Shari'ah-compliance function will enhance risk management in IFIs.

An abstract is written in Arabic.

The book presents a study of the theoretical foundations for Islamic transactions. It provides the reader with a solid background which is essential for a comprehensive knowledge Islamic transactions, banking and finance. The main discussion include the sources for Islamic commercial and financial laws, the objectives of Sharia'ah with regard to commercial and financial transactions, property and its classifications and their implications for transactions, rights and financial rights, ownership and its types, the theory of contract, the pillars of contract, its classifications, and its options. The last chapter discusses factors that invalidate transactions such as usury/interest (riba), ambiguity (gharar), gambling (maysir), and the involvement of prohibited properties. The book is as important text note only for the students but also for all those who work in Islamic banks and financial institutions.

The doctrine of judicial precedent plays an empirical role in common law, but it has only persuasive value in European continent countries which are practicing civil law system.It has not been recognised as having binding force in Islamic judicial system. In Islam, each case has to be decided based on its own merit and previous decisions can only be considered as guidance for the future cases. This position is still being maintained by some countries such as Malaysia and Saudi Arabia. In Pakistan and Nigeria the doctrine of judicial precedent is applied in deciding cases. Due to this contradiction among Islamic judicial system in various countries, a question arises relating to the feasibility of the application of the doctrine of judicial precedent in Shariah courts. Accordingly, in this paper, the factual nature of the judicial precedents in Islamic judicial systems have been examined comparatively in some details with reference to some selected countries such as Malaysia, Nigeria and Pakistan. This paper points out that the doctrine of stare decisis and judicial precedent can be applied in Shariah courts as guiding precedents but not as binding since there is no express prohibition in Shariah to take judicial guidance from previous decisions.

The purpose of this article is to illuminate one of the contemporary legal dilemmas in Islamic law, namely the appointment of female judges in Muslim countries. The methodology employed is library-based research. The focus of this article is to determine the legal status of appointments of female judges in Shariah courts. It is argued here that female judges can be appointed in Muslim countries and that the main reason for this is that there is no explicit prohibition of it in the fundamental sources of Islamic law. However, the claims that it is contrary to Islamic law to appoint female judges are also discussed here. The outcome of this article is to prove that there is nothing wrong in Islam in appointing female judges as long as they fulfil the necessary conditions.

Islam offers a sustainable and comprehensive development model for humanity that can be systematically categorised as the means as well as the ideal outcome of achieving Maqasid (objectives) of Shari'ah (Islamic law). As a rule-based religion, Islam's prescription for development goes well beyond market regulations and includes rules necessary to maintain a dignified life; in order that the faithful can maximise their intellectual capacity, preserve and promote their health and education, and have equal opportunity for employment and partnership in the economic and social development of society, and unhampered by practices of fraud, cheating, corruption, or property abuse, among others. In practice, however, there is dichotomy between Islam's prescription and the current state of affairs in Muslim countries. In order to develop a better understanding of the factors contributing to this divergence, this paper provides the design of a benchmark for the monitoring of adherence to and compliance with Maqasid al-Shari'ah. This benchmark is intended to serve as a self-inspection tool for policy makers to monitor economic, social and policy development within the scope of Maqasid, and to serve as a benchmark for the progress and performance of OIC member countries

Beneficial ownership is applied in the modern Islamic financial contracts such as financing and sukuk structure, especially in countries where common law is dominant. It has been recognized by some scholars and rejected by others. In this regard, the concept of beneficial ownership in Shari'ah should be analysed to develop a clear interpretation of the concept of beneficial ownership from the Shari'ah perspective. The purpose of this study is to examine the meaning of beneficial ownership in Common Law system and its recognition from the Shari’ah point of view. It begins with identifying the meaning of milkiyyah (ownership) and its characteristics in the Islamic law and followed by the analysis of beneficial ownership in the current practice of Islamic finance as to whether it fulfils the Shari’ah requirements. The approach that is applied in this study is qualitative research in nature, with regards to documentation and secondary sources by reviewing and analysing the application of beneficial ownership in Islamic banking; in addition, some interview sessions were conducted with practitioners involved in the financial industry. The findings of the research are that the transfer of ownership in Shari’ah immediately occurs after the execution of ijāb and qabūl and interestingly, this idea is also shared by the Common law, which actually borrowed it from the Islamic law.

Timur Kuran is an avid reader of Islamic economic and legal history and an immensely well informed scholar. This latest work not only combines his earlier arguments but also provides some new perspectives. The gist of Kuran's arguments is the following (p. 281) - 1. In its early centuries Islam developed a law of contracts that was sophisticated for the time; 2. This law allowed passive investors to shield their personal assets while … however, active partners carried full liability; 3. The death of a partner terminated the partnership automatically; 4. Due to the Islamic inheritance law and polygamy the numbers of heirs could be large; 5. The partnership termination rule, like the lack of entity shielding, discouraged the formation of large and long-lived partnerships. Successful businesses quickly disappeared and rarely survived the death of their founders; 6. The evolution from simple partnerships to the corporation never took place; 7. Thus several self-enforcing elements of Islamic law — contracts, inheritance system, marriage regulations — jointly contributed to the stagnation of the Middle East.

This article is an attempt to formulate a viable Shari'ah framework for juristic differences in contemporary Islamic finance. While acknowledging the legitimacy of juristic differences as an inherent feature of Islamic law, such differences could jeopardize a nascent Islamic finance industry, leading to what has come to be arbitrarily termed 'Shari'ah risk' in Islamic finance. Two blocks appear to represent the two disputing sides since the launch of this industry, i.e., the Middle Eastern and South East Asian markets. Thus, this article aims to bridge differences in Islamic finance by proposing a framework and set of parameters that can be applied to all Islamic banking, Islamic capital market and takaful products. Apart from the outlined framework that aims to circumvent juristic disputes, this article concludes that juristic dispute resolution in Islamic finance will not be attainable until one can appreciate the legal and regulatory differences in which Islamic finance operates worldwide.

To codify or not to codify, is, in matters of the law, the paramount jurisprudential question. More so when the laws in question relate to and are to govern a relatively budding industry, such as that of the Islamic banking and finance (IBF) industry. This paper examines the respective legal and regulatory landscape of four countries, Saudi Arabia, Pakistan, Sudan and Malaysia vis-a-vis IBF, particularly whether the presence or absence of codified Shariah law for IBF matters play any role in the development of their respective IBF industries and whether Malaysia can draw any lessons from the experiences in Saudi Arabia, Pakistan and Sudan to ascertain the need/viability/manner in which to promulgate codified Shariah law for IBF ... Kindly email to kmc@inceif.org to access the item.

This study examines the concept of combination of contracts in Islamic commercial law and its application in the Malaysian Islamic financial services. Combination of contracts encounters some juridical issues by virtue of the three prohibiting ahadith mentioned by the Prophet (s.a.w.). The ahadith stated that the Prophet (s.a.w.) prohibited combining two sales in one sale, loan and sale, as well as two transactions in one transaction. Many debates have been raised among classical and contemporary Shari'ah scholars regarding the interpretation of these ahadith and the types of contracts that are combinable or non-combinable. Given the fact that these issues remain obfuscated, therefore this study is commenced. In so doing, this study employs two research methodologies; content analysis of Islamic jurisprudence's sources and case studies. The result of the study demonstrates that combination of contracts is generally permitted in Islamic commercial law, as long as there is no Quranic verse or Prophetic tradition that prohibits the combination. Concerning the understanding of three ahadith reported, they must be interpreted within specific context ...

In a recent landmark case, JRI Resources Sdn. Bhd. v Kuwait Finance House (Malaysia) Berhad, the Federal Court, the apex court in the judicial system of Malaysia, decided that the ascertainment of Islamic law by the Shariah Advisory Council of Bank Negara Malaysia (SAC) is binding on the judiciary and is not tantamount to a judicial decision. Of the nine panel judges, four judges dissented, arguing against the legality and constitutionality of the SAC. The dissenting judges argued that the SAC has been vested with judicial power by section 57 of the Central Bank of Malaysia Act 2009; hence, this section is unconstitutional and invalid and needs to be struck down. This brief write-up will shed some light on key issues underlying this historic judgment. Before that, let us take a quick look at the impetus that spurred the establishment of the SAC.

This paper aims to highlight resolution of Islamic finance dispute by common law-orient courts in Nigeria with respect to Shari'ah non-compliance and legal risks thereof, as well as the lesson to learn from Malaysia in that regard. This is with view to ensuring Shari'ah compliance and legal safety of Islamic finance practice as prerequisites for sustainability of the Nigerian Islamic finance industry. A qualitative method was used; interviews were conducted with different categories of experts and primary data collected in relation to Shari'ah non-compliance and legal risks in adjudicating Islamic finance dispute by civil courts and the role of expert advice as basis for court referral to Financial Regulation Advisory Council of Experts. A doctrinal approach was adopted to analyse relevant legislative provisions and content analysis of secondary data relevant to applicable provisions in matters of finance before civil courts.

As the Islamic finance industry continues to gain popularity in the financial sphere, the number of faithful investors who are interested in Shari'ah-compliant avenues for their investments also continues to increase. One of the most important of these is the equity market. However, it is evident in today's world that it is hard to find a joint stock company whose activities are completely compliant to Shari'ah principles and rulings. As a share of a company represents all the activities and underlying assets of the company, the Shari'ah noncompliance issue can emerge in the share. While the primary activities of a company are Shari'ah-compliant, its peripheral activities may be impermissible from the Shari'ah viewpoint. Meanwhile, the assets of the company can also be in the form of cash, debt, goods, usufruct or rights, which can raise the issue of trading ribawi (interest-based) items. Thus, the study addresses the issue of Shari'ah compliance and tradability of shares that represent a mixture of halal (permissible in Islamic law) and haram (impermissible in Islamic law) activities and assets.

Shari'ah has specific rules for dealing in each class of assets and activities; i.e., cash, debt, goods, usufruct, and those classified as either halal (permissible) or haram (impermissible). These rulings can be easily applied when such an asset or activity is an independent subject matter of a transaction. However, the issue becomes complicated when an asset or activity is mixed with others and the combination is represented as a single subject matter. A fine example of this situation is shares of a joint stock company. A company share represents all the activities and underlying assets of that company. Some of the activities and assets of that company may be Shari'ah non-compliant while some may be Shari'ah compliant. Such assets can be in any form; i.e., cash, debt, goods, usufruct or rights. There are two main issues that need to be dealt with in considering a company's shares: (1) when it represents a mixture of halal and haram activities and assets, and (2) when it represents a mixture of ribawi and non-ribawi assets.

Intangible assets are becoming evident in a number of Islamic financial products. Their presence in the Islamic financial market is due to their ability to address and accommodate the pressing need to diversify the asset pool in the industry. Despite their increasing presence in a number of Islamic financial products, their nature and characteristics have not been the subject of the research they deserve. Hence this research is undertaken to examine the definition, concept and legality of this class of asset: intangible assets. This paper aims to achieve the following objectives: i. To explore the definition and concept of intangible assets from Shariah, legal and accounting perspectives; and ii. To examine pertinent Shar??ah issues on intangible assets, particularly with regard to recognition and measurement, financing and trading, and zakah obligation.

Fatwa plays a very significant role in Shariah by providing different resolutions and solutions to the Muslim community when it is needed to ensure the compliance with principles of Shariah and commends of God. It should be understood that fatwa is not confined to particular section in Islamic law but it covers the entire sections and subsection of Islamic law including business, finance and trade. Today, fatwa takes a different shape in Islamic finance; it is introduced and presented in the industry in the form of resolutions issued by Shariah board members who represent Shariah corporate governance body in the structure of the Islamic financial institutions. The resolution is further structured in the form of Shariah endorsement which is part and parcel of product approval as required by the regulators. The present paper discusses fatwa and its methodology in Islamic finance to ensure a sound process of issuing an accurate resolutions that comply with the rules and guidelines that have been set in Islamic jurisprudence.

The doctrine of judicial precedent plays an empirical role in the common law system, but it only has persuasive value in European countries which are practicing the civil legal system. Moreover, it has not been recognised as having a binding force in the Islamic legal system and thus each case has to be decided based on its own merits and previous decisions were merely considered as guidance for the future decision. This position is still being maintained by some countries such as Malaysia and Saudi Arabia. In Pakistan and Nigeria, however, the doctrine of judicial precedent is followed. Due to this contradiction among the Shariah legal system in various countries, as a result, a question arises relating to the feasibility of the application of the doctrine of judicial precedent in Shariah Courts needs thorough study. Accordingly, in this paper, the factual nature of the judicial precedents in both civil and Shariah legal systems have been examined comparatively in some detail with reference to countries such as England, Malaysia, Nigeria and Pakistan. This paper points out that the doctrine of stare decisis and judicial precedent can be applied in the Shariah Courts system as guiding precedents but not as binding precedents since it is allowed in Shariah to take guidance from previous decisions and there is no express prohibition in Shariah on them.

This dissertation examines financial crimes from a Shari'ah perspective by looking at the specific offences of illegal deposit taking and criminal breach of trust in Malaysia. The underlying principles of criminal law in Islam is espoused to give rise to the nomenclature of financial crimes within the Shari'ah by exposing elements of criminal activities that are acted in the realm of finance. The elements of offences for Illegal Deposit Taking and Criminal Breach of Trust are examined through statutes and case laws and compared to the elements of crime available in the Shari'ah ...