An empirical investigation into the problems and challenges facing islamic banking in Malaysia

Mohd Zamil, Nor Aiza 2014. An empirical investigation into the problems and challenges facing islamic banking in Malaysia. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

The establishment and operation of Islamic banking and finance is governed by Shari’ah principles. These specific underlying principles give a new dimension to its governance structure, which is known as Shari’ah Governance. The aim of this research is to examine the theoretical and practical aspects of problems and challenges facing Islamic banking and finance in Malaysia. The study focuses on four main issues: legal and regulatory framework, Shari’ah compliance, management, and accounting. In order to achieve the objectives, this study surveys different groups of respondents who are involved in the operation of Islamic banking and finance, using semi-structured interviews. The key respondents are members of the Shari’ah Committee, Shari’ah Officers and Chief Executive Officers (CEO). The major problems and challenges which emerged from the interview findings are the influence of the dual-banking environment, lack of support from the regulatory framework related to products and services, Shari’ah non-compliance, operation and management, lack of expertise in human capital, lack of accountability, and lack of influence of accounting practices and auditing. The majority of key respondents explicitly highlighted these findings. According to agency theory, accountability is the primary corresponding function for decision making in the banking system; however, this does not appear to be transparent in the Islamic banking sector. As in most contexts of Islamic banking, inadequate accounting practices are also considered to be the major challenge that Islamic banking face. Regarding this challenge, the Islamic banking system has not achieved the ultimate objective in implementing Shari’ah in the banking system. However, with constraint and uncertainty, several efforts have been made to achieve a homogeneous structure. Radical innovation of accounting practices that support Shari’ah could be the alternatives to assist the Islamic banking system to become more efficient and effective. Theories such as agency theory, stakeholder theory and institutional theory could serve as pillars to support the implementation in order to enhance Shari’ah activities. In addition, the explanation of agent morality of the stakeholder model is also important, as Islamic banking personnel need to uphold Shari’ah principles and commercial viability. Furthermore, institutional theories are employed in the explanation of the organisational behaviour of IBs.

Item Type:	Thesis (PhD)
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Funders:	Malaysian University
Last Modified:	27 Oct 2023 14:15
URI:	https://orca.cardiff.ac.uk/id/eprint/68349

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