Regulated Shariah compliance: the case of Islamic fnance in Malaysia
The historical evolution of regulated Shariah compliance in Malaysia started 32 years ago wherein the Islamic banking industry was first regulated by the Islamic Banking Act 1983 (IBA). Under the IBA, Shariah compliance became 'institutionalized' through the formation of a Shariah committee at the first Islamic bank in Malaysia, i.e. Bank Islam Malaysia. Thereafter the number of Islamic financial institutions (IFIs) started to grow. This growth is followed by the growth of Shariah committees being set up in each of these IFIs. Numerous Shariah resolutions started to mushroom from these Shariah committees which at times result in duplicity and inconsistency of rulings (based on the ISRA Research Paper (No. 47/2012) titled 'The Shariah Advisory Council's Role in Resolving Islamic Banking Disputes in Malaysia: A Model to Follow?' by Mohamad, Abdul Hamid and Trakic, Adnan. (2012)). To overcome this, Malaysia's central bank (CBM) established a national reference Shariah advisory body called the Shariah Advisory Council (SAC) on the 1st May 1997. It was only in 2003 that the SAC was given due statutory recognition and empowerment through the amendment of the Central Bank of Malaysia Act 1958 (CBA). The amendment that came through the Central Bank of Malaysia (Amendment) Act 2003 elevated the position of the SAC. Under the CBA, the SAC is deemed as "the authority for the ascertainment of Islamic law for the purpose of Islamic banking business, Takaful business, Islamic financial business...". However, at this stage the adherence and compliance of the resolutions issued by the SAC is only mandatory on the IFIs, Takaful operators and arbitrators.
Shariah compliance , Islamic finance , Malaysia
Kasri, N. S. (2015). Regulated Shariah compliance: the case of Islamic fnance in Malaysia. Islamic Finance News, (20 May 2015), pp. 24-25.