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Book part
Publication date: 26 August 2019

Surianom Miskam, Abdul Monir Yaacob and Romzie Rosman

The global Islamic financial landscape is changing with rapid advances in technology. The increasingly tech-savvy demography is presenting both opportunities and…

Abstract

The global Islamic financial landscape is changing with rapid advances in technology. The increasingly tech-savvy demography is presenting both opportunities and challenges to the industry. With the advances in e-finance and mobile technologies, financial technology (Fintech) innovations emerged by combining the e-finance, Internet, social networking services, social media, artificial intelligence (AI) and big data analytics. Fintech promises to reshape the Islamic financial landscape by improving processes’ efficiencies, cost-effectiveness, increased distribution, Sharīʿah compliance and financial inclusion. As far as the Islamic fund management industry is concerned, AI seems to be the keyword. Islamic fund managers have recently started to incorporate AI and big data analytics into their strategy in the process of making accurate decisions based on facts and figures, which eliminates any biases and personal intuition. This disruption in status quo is raising new issues, new concerns and new exciting opportunities. While disruption may carry negative connotations, the industry players have been embracing the innovation and potential revolution the technology could offer. Thus, the objective of this chapter is to discuss legal aspects of Fintech and its impact on the Islamic fund management industry in Malaysia. This chapter introduces a historical overview of Fintech and its evolution in the Islamic fund management industry. This chapter further provides an overview of the legal and regulatory aspects of Fintech with regards to the industry. Finally, legal issues and challenges are identified and discussed. Being a legal research, this chapter adopts a qualitative method by analysing the relevant literatures on the subject. This chapter is expected to provide an insight into the application of Fintech and its impact on the Islamic fund management industry in Malaysia.

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

Keywords

Article
Publication date: 9 October 2017

Umar A. Oseni

This study aims to examine the phenomenon of Fatwā shopping, its effect on consumer trust in Islamic finance products and the need for effective consumer protection…

Abstract

Purpose

This study aims to examine the phenomenon of Fatwā shopping, its effect on consumer trust in Islamic finance products and the need for effective consumer protection regulations in the Islamic finance industry.

Design/methodology/approach

The methodology used in this study is qualitative research which draws significantly from relevant regulations on financial consumer protection through analytical method to identify common themes on Fatwā shopping and consumer trust in the relevant literature.

Findings

This study finds that the increasing practice of Fatwā shopping through clandestine searches by some Islamic banks to get their new products endorsed by leading Sharī‘ah scholars requires proper legal regulation to avoid a total erosion of trust in the entire Islamic finance industry.

Research limitations/implication

Though Fatwā shopping is practiced in the Islamic finance industry, it is always difficult to get some desperate Islamic bankers to agree to this; hence, this study does not portend to examine the evidence on Fatwā shopping, but it seeks to bring to the fore the effect of Fatwā shopping on consumer trust in Islamic financial services, and the need for effective consumer protection regulations.

Practical implications

This study is expected to provide an invaluable guide and policy framework for emerging and promising jurisdictions on the need to regulate Fatwā shopping through an effective legal framework based on some best practices identified in the study.

Originality/value

Though there have been a number of studies relating to Fatwā shopping, focusing on the need for effective consumer protection regulations in the Islamic finance industry will enrich the existing literature and have significant implications for the future of the industry.

Details

Society and Business Review, vol. 12 no. 3
Type: Research Article
ISSN: 1746-5680

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Article
Publication date: 13 February 2017

Umar A. Oseni and Sodiq O. Omoola

This study aims to examine the prospects of using an online dispute resolution (ODR) platform for resolving relevant Islamic banking disputes in the usual banker–customer…

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Abstract

Purpose

This study aims to examine the prospects of using an online dispute resolution (ODR) platform for resolving relevant Islamic banking disputes in the usual banker–customer relationship in Malaysia. It is argued that through proper regulation, such innovative dispute management mechanism would not only address some legal risks associated with banking disputes but could also prevent reputational risks in the Islamic financial services industry.

Design/methodology/approach

Based on an internet survey, responses were obtained from about 109 respondents in Malaysia. The data obtained were subjected to multivariate statistical analyses considering factors such as access to justice, attitude of stakeholders, resolving disputes, practical issues and understanding of ODR.

Findings

The results obtained showed that “access to justice”, “attitude of stakeholders” and “resolving disputes” are the most influencing factors affecting the intention to use ODR among stakeholders, particularly customers and bankers in the Islamic financial services industry in Malaysia.

Practical implications

This study provides a way in which the recently introduced Islamic Financial Services (Financial Ombudsman Scheme) Regulations 2015 can be better enhanced to cater for internet banking disputes which might require an ODR framework.

Originality/value

Though there have been numerous studies on the dispute resolution framework in the Islamic banking industry in Malaysia generally, the current study focuses on a less explored framework – ODR– a new framework for handling banking disputes.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 26 August 2019

Noor Mahinar Abu Bakar, Norhashimah Mohd Yasin, Siti Salwani Razali and Ng See Teong

This chapter aims to examine Bank Negara Malaysia’s (BNM) approach in fulfilling its financial consumer protection mandate from unfair contract terms and the statutory…

Abstract

This chapter aims to examine Bank Negara Malaysia’s (BNM) approach in fulfilling its financial consumer protection mandate from unfair contract terms and the statutory framework relevant for consumer protection in the domestic market. This is a qualitative-based research. Using content analysis, this study analyses BNM’s Financial Stability and Payment Systems Report from 2012 to 2016, specifically on the ‘market conduct and consumer empowerment’ to explore BNM’s prudential regulatory, supervisory and consumer protection roles in protecting bank consumers from unfair contract terms. It is found that even if a number of standards and guidelines have been issued by BNM in improving ‘fairness and transparency’, the potential risk facing bank consumers from unfair terms in standard consumer contracts of Islamic banks especially where terms may be unfair or unclear remains unchanged. This study recommends that BNM as the Central Bank and financial regulator of Malaysia promotes self-regulation of the Islamic banks by adopting value-based banking of a consumer-focussed culture in delivering an effective protection for consumers from unfair contract terms and empowering them in their dealings with Islamic banks in Malaysia. This study will be helpful in bringing a policy formulation by BNM in identifying their weak areas and suggesting improvements in pursuing a strong consumer protection agenda from unfair contract terms.

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

Keywords

Article
Publication date: 29 August 2008

Mohamad Akram Laldin

The purpose of this paper is to elaborate and elucidate the experience of Malaysia in developing the Islamic financial system by explaining the different developments and…

13008

Abstract

Purpose

The purpose of this paper is to elaborate and elucidate the experience of Malaysia in developing the Islamic financial system by explaining the different developments and methods that has been deployed since its inception in 1963 until now and how best these experience can be used in developing Islamic financial industry.

Design/methodology/approach

The objectives are achieved by analyzing the different materials gathered through library research. The sources of the materials includes books, statistics, reports, presentations and conference papers. The scope of the study is limited to the Malaysian financial industry development.

Findings

The paper found that Malaysia has a very encouraging history of Islamic banking and has big potential to succeed in this area. However, some areas need to be improved, as suggested in the paper. It also found that the Malaysian model in developing Islamic financial industry can be taken as a benchmark in the development of such industry in other countries.

Originality/value

The originality of the paper lies in the in‐depth analysis of the different steps of development that Malaysia has gone through in the development of Islamic financial market, including banking, capital market and Takaful.

Details

Humanomics, vol. 24 no. 3
Type: Research Article
ISSN: 0828-8666

Keywords

Article
Publication date: 12 November 2020

Zakariya Mustapha, Sherin Binti Kunhibava and Aishath Muneeza

The purpose of this paper is to review the literature on Islamic finance vis-à-vis legal and Sharīʿah non-compliance risks in its transactions and judicial dispute…

Abstract

Purpose

The purpose of this paper is to review the literature on Islamic finance vis-à-vis legal and Sharīʿah non-compliance risks in its transactions and judicial dispute resolution in Nigeria. This is with a view to putting forward direction for future studies on the duo of legal and Sharīʿah non-compliance risks and their impact in Islamic finance.

Design/methodology/approach

This review is designed as an exploratory study and qualitative methodology is used in examining relevant literature comprising of primary and secondary data while identifying legal risk and Sharīʿah non-compliance risks of Nigeria’s Islamic finance industry. Using the doctrinal approach together with content analysis, relevant Nigerian laws and judicial precedents applicable to Islamic finance practice and related publications were examined in determining the identified risks.

Findings

Undeveloped laws, the uncertainty of Sharīʿah governance and enforceability issues are identified as legal gaps for Islamic finance under the Nigerian legal system. The gaps are inimical to and undermine investor confidence in Nigeria’s Islamic finance industry. The review reveals the necessity of tailor-made Sharīʿah-based regulations in addition to corresponding governance and oversight for a legally safe and Sharīʿah-compliant Islamic finance practice. It brings to light the imperative for mitigating the legal and Sharīʿah non-compliance risks associated with Islamic finance operations as crucial for Islamic finance businesses, Islamic finance institutions and their sustainable development.

Research limitations/implications

Based on content analysis, the review is wholly doctrinal and does not involve empirical data. Legal safety and Sharīʿah compliance are not to be compromised in Islamic finance operations. The review would assist relevant regulators and investors in Islamic financial enterprises to understand and determine the impact and potential ramifications of legal safety and Sharīʿah non-compliance on Islamic Finance Institutions.

Practical implications

This study provides an insight into the dimensions and ramifications of legal and Sharīʿah non-compliance risks of Nigeria’s Islamic finance industry. This study is premised on the imperative for research studies whose outcome would inform regulations that strike a balance between establishing Islamic financial institution/business and ensuring legal certainty and Sharīʿah compliance of their operations. This study paves way for this kind of research studies.

Originality/value

The findings and discussions provide a guide for regulators and researchers on the identification and mitigation of legal and Sharīʿah non-compliance risks in Islamic finance via a literature review. This study, the first of its kind in Nigeria, advances the idea that research into legal and Sharīʿah non-compliance risks of Islamic financial entities is key to mitigating the risks and fostering the entities and their businesses.

Details

International Journal of Law and Management, vol. 63 no. 2
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 7 September 2015

Rusnah Muhamad and Sharifah Alwi

The purpose of this paper is to discuss how the current research on the Islamic financial services industry attempts to classify its consumers and provide a fresh and…

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Abstract

Purpose

The purpose of this paper is to discuss how the current research on the Islamic financial services industry attempts to classify its consumers and provide a fresh and critical insight into the retail Islamic banking market segmentation to harness and enhance understanding, as well as provide a guideline for a better segmentation to bank marketers.

Design/methodology/approach

This study is conceptual in nature. Based on Qur’anic verses and previous literature, the authors aim to propose an applicable model of market segmentation for the retail Islamic banking market in Malaysia. Consumer segmentation in the conventional financial service industry is analysed, and prior studies on the selection criteria of Islamic banks are evaluated.

Findings

In moving forward, taking cue from the classification of people in classical doctrinal and historical literature and the initial exploratory study conducted from the managerial perspective, the authors propose five cluster groups of consumers for the retail Islamic banking market in Malaysia, namely, religious conviction, religious and economic rationality, economic rationality, ethical observant and economic rationality and ethical observant. A discussion linking consumer segmentation to the branding in the retail Islamic banking market is discussed.

Research limitations/implications

The five cluster groups of consumers for the retail Islamic banking market in Malaysia proposed in this study pave the way for embarking on promising and relevant future research, which is needed to substantiate and enrich the academic understanding and managerial practice of linking market segmentation and brand positioning for Islamic banking market in Malaysia. Future research should focus on verifying the five proposed segments by conducting empirical studies on a larger scale among the retail banking consumers in Malaysia and globally.

Practical implications

The study provides an initial bases or dimensions of consumers of the retail Islamic banking market in Malaysia. The proposed consumers segments are useful in guiding the management of Islamic bank in Malaysia in making decisions relating to the promotion strategy as well as product and brand positioning strategy.

Originality/value

For both academia and the Islamic banking industry, this study provides useful knowledge in strategically using market segmentation to position Islamic banking products and services in Malaysia and the global market.

Details

Asia-Pacific Journal of Business Administration, vol. 7 no. 3
Type: Research Article
ISSN: 1757-4323

Keywords

Book part
Publication date: 25 August 2014

Abstract

Details

The Developing Role of Islamic Banking and Finance: From Local to Global Perspectives
Type: Book
ISBN: 978-1-78350-817-4

Article
Publication date: 5 June 2019

Akilu Aliyu Shinkafi, Sani Yahaya and Tijjani Alhaji Sani

The purpose of this paper is to evolve a theoretical account that highlights the determinations for achieving financial inclusion in Islamic finance.

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Abstract

Purpose

The purpose of this paper is to evolve a theoretical account that highlights the determinations for achieving financial inclusion in Islamic finance.

Design/methodology/approach

The methodology used is a library approach where the existing and relevant document remains the sources of concern.

Findings

The outcome of the study designates that robust technology; microcredit and microfinance services; legal and regulatory commitment of the regulators and policymakers of the Islamic financial institutions; extensive public awareness of Islamic financial services and products; financial proficiency and literacy; and financial infrastructure are some of the imperative drives for realising financial inclusion particularly for women, low income earners and rural poor.

Research limitations/implications

The paper limited itself to realising financial inclusion in Islamic finance. Thus, anything beyond the stated limitation is outside the scope of our objective. The paper has an inference for the concerned professional bodies, regulators, policymakers, stakeholders and practitioners of Islamic financial institutions.

Originality/value

The paper is original in its nature, it is also a pearl and a reference to those who may conceive and cherish the relevance of its capacity.

Details

Journal of Islamic Marketing, vol. 11 no. 1
Type: Research Article
ISSN: 1759-0833

Keywords

Article
Publication date: 29 May 2019

Wan Marhaini Wan Ahmad, Mohamed Hisham Hanifa and Kang Choong Hyo

The purpose of this paper is to investigate the awareness of non-Muslims coming from a non-Muslim-majority country regarding Islamic financial services, in particular, the…

Abstract

Purpose

The purpose of this paper is to investigate the awareness of non-Muslims coming from a non-Muslim-majority country regarding Islamic financial services, in particular, the takaful products.

Design/methodology/approach

This paper uses structured questionnaires to acquire and understand South Korean citizens’ perceptions of Islamic financial services (primarily takaful) to reinforce the scant previous literature in this area of research. The questionnaires are developed and adapted based on a previous study by Htay and Salman (2013). The sample consisted of 121 Korean people who were living in Ampang, a popular suburb for South Koreans in Kuala Lumpur.

Findings

The findings indicate that even South Korean citizens who have dwelled in Malaysia for a significant amount of time had little awareness of Islamic financial services. Upon personal explanation about the product, however, they showed a significant interest to get to know about takaful and a willingness to subscribe to it in the near future.

Research limitations/implications

Respondents are limited to only South Koreans who are residing in Malaysia.

Practical implications

Understanding the level of awareness about Islamic financial services among non-Muslims residing in Muslim-majority country.

Social implications

There is ample scope to penetrate the non-Muslim market for Islamic financial products.

Originality/value

There is a growing concern over the lack of research in the area of perceptions of Islamic financial services among non-Muslims from non-Muslim-majority countries. The lack of study in this area of research has often been overshadowed by research studies on perceptions of Islamic financial services among non-Muslim residents in Muslim-majority countries, which may have led to a dearth of proper strategies in the Islamic financial industry to penetrate non-Muslim-majority markets.

Details

Journal of Islamic Marketing, vol. 10 no. 3
Type: Research Article
ISSN: 1759-0833

Keywords

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