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What is the insolvency regime applied under Shariah for Islamic banks?

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Date
2024
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Abstract
This study aims to develop a comprehensive insolvency model tailored to Islamic banks, ensuring alignment with Shariah principles throughout pre-insolvency, bankruptcy and post-bankruptcy stages. The research adopts a qualitative research method, using a desktop research approach. Primary sources and secondary sources are examined to gather information and draw conclusions. This study presents a comprehensive insolvency model designed for Islamic banks, rooted in Shariah principles. The model covers pre-insolvency, bankruptcy (taflis) and post-bankruptcy stages, incorporating key Shariah parameters to ensure adherence to Islamic finance principles. It addresses challenges such as adapting to dynamic financial landscapes and varying interpretations of Shariah principles. Notably, the model recognizes the separate legal personality of Islamic banks and emphasizes transparency, fairness and compliance with religious obligations. In the post-bankruptcy stage, directors are urged to voluntarily settle remaining debts, aligning with ethical and Shariah-compliant standards. The study contributes to the stability and growth of Shariah-compliant financial systems by extending insolvency principles to Islamic banks, providing a foundation for future research and policymaking specific to this context.
Keywords
Islamic banks , Insolvency , Shariah perspective , Artificial persons , Companies , Iflas
Citation
Md Nor, A. H., Muneeza, A., & A. Mohsin, M. I. (2024). What is the insolvency regime applied under Shariah for Islamic banks? International Journal of Law and Management. https://doi.org/10.1108/IJLMA-08-2023-0191
Publisher
Emerald Publishing Limited
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What_is_the_insolvency_regime_applied_under_Shariah_for_Islamic_banks_Aishath Muneeza_Magda Ismail.pdf

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