The success and final outcome of this project require a lot of guidance and assistance from many people and we are extremely fortunate to have got this all along the completion of our assignment. Whatever we have done is due to the guidance and assistance that we receive and we should not forget to thank them.
We would like to express our deepest appreciation to Mr Zainal Azhar Bin Zainal Azim who is our lecturer for Islamic Finance on giving us the opportunity to work on the assignment and providing us with lots of support and guidance which has helped us to complete the assignment on time. This assignment has brought us in making lots of research and we came across to acquire new things about Islamic Finance and Islamic banking specifically.
Nevertheless, we would also like to thank our fellow classmates who have been providing ideas, contributing their time and also the cooperation to complete our assignment on time. Without them, this project would might not come into its present form.
The compliance with Shariah principles is an integral feature in the Islamic banking and finance. An effective and conducive Shariah framework is imperative in assuring such compliance. It will underpin a comprehensive and wholesome development of this sector. An effective Shariah framework will harmonize the Shariah interpretations, strengthen the regulatory and supervisory oversight of the industry and will also foster and nurture a pool of competent Shariah advisers.
To achieve the above objectives, Bank Negara Malaysia has amended the Central Bank of Malaysia Act 1958 to enhance the role and functions of its Shariah Advisory Council for Islamic Banking and Takaful (SAC). This amendment has accorded the SAC as the sole Shariah authority in Islamic finance. As the sole Shariah authority, the SAC will be referred to by the court or arbitrator in disputes involving Shariah issues in Islamic banking, finance and takaful cases.
To effectively play its role, the SAC operates as an independent body. An independent SAC with high level of integrity will command public confidence and thereby will boost the industry to a greater height. There is also a crucial need to define the relationship between the SAC and Shariah bodies which act as Shariah advisers in the industry. Towards this end, the Shariah bodies in the Islamic financial institution need to be rationalised. A Shariah body in the industry which is to be known as a Shariah Committee, will play a complementary role to the SAC of Bank Negara Malaysia.
In light of the above, Bank Negara Malaysia has prepared the Guidelines on the Governance of Shariah Committee for the Islamic Financial Institutions that regulates the governance of Shariah Committee of an Islamic financial institution.
DEVELOPMENT OF ISLAMIC BANKING IN MALAYSIA
Establishment of Lembaga Tabung Haji which mobilizes and manages the savings of
Muslims for their intention to perform the haj 1983
The Islamic Banking Act and the first Islamic bank licensed is Bank Islam Malaysia Berhad established on 1 July 1983 1984
First licensed takaful operator was established
Establishment of the Labuan International Offshore Financial Centre (IOFC) which also provides Islamic financial services 1993
BNM set up the Skim Perbankan Tanpa Faedah which was later known as Islamic Banking Scheme (IBS) that allows conventional banks to offer Islamic windows’ banking products 1994
Interbank Islamic Money Market was established. This introduced the Islamic interbank cheque clearing system based on the Mudharabah principle where the deficit of the clearing account of one IBS will be funded by the surplus funds from other IBS banks or by BNM 1997
Formation of the National Shariah Advisory Council in BNM 1998
Establishment of the 2nd Islamic bank – Bank Muamalat – with the merging of the Islamic banking assets of Bank Bumiputra, Bank of...
References: Laws of Malaysia, Act 276, Islamic Banking Act 1983
Laws of Malaysia, Act 372, Banking and Financial Institutions Act 1989
Laws of Malaysia, Act 759, Islamic Financial Services Act 2013
Islamic Finance and Banking System, Philosophies, Principles & Practices by Sudin Haron, Wan Nursofiza Wan Azmi
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