Shariah Compliance: An Empirical Study on the Perceptions of Islamic Financial Institutions in Pakistan

Research Article
Open access

Shariah Compliance: An Empirical Study on the Perceptions of Islamic Financial Institutions in Pakistan

Dr.Sahar Munir 1* , Sana Saleem 2 , Muhammad Imran Majeed 3
  • 1 Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan    
  • 2 Institute of Business Management Sciences, University of Agriculture, Faisalabad, Pakistan    
  • 3 Putra Business School, University Putra Malaysia, Kuala Lumpur, Malaysia    
  • *corresponding author sahar.munir@uaf.edu.pk
Published on 21 March 2023 | https://doi.org/10.54254/2754-1169/3/2022825
AEMPS Vol.3
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-15-7
ISBN (Online): 978-1-915371-16-4

Abstract

This paper examines the importance of Shariah Compliance for Islamic Financial Institutions (IFI) in Pakistan along with the process followed to ensure it. Islamic Banking was initiated in Pakistan in early 2000s and by now a proper network exists with a market share of 13.6 % of Assets and 14.7% of deposits with a network of 21 Islamic Banking institutions, out of which 5 are full-fledged Islamic Banks and 16 conventional banks have standalone Islamic windows. This study contributes as being first of its nature to study the Shariah compliance in the context of Pakistan. For the study, mainly primary data was used. Interviews of Shariah Compliance Heads and Shariah Advisors were conducted. The results indicate that a Shariah Compliance acts as a vital element for Islamic banking in Pakistan and influences the operations carried out by them. Moreover, a proper Shariah Governance System is also implemented and followed by the Islamic Financial Institutions. In addition to this, Shariah Advisors also play a pivotal role in the whole procedure and are responsible for Shariah Compliance in the IFIs.

Keywords:

Shariah Compliance, Pakistan.

Munir,D.;Saleem,S.;Majeed,M.I. (2023). Shariah Compliance: An Empirical Study on the Perceptions of Islamic Financial Institutions in Pakistan. Advances in Economics, Management and Political Sciences,3,497-506.
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References

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[39]. www.kse.com.pk Retrieved Ocober 27, 2012

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[41]. Zaher, T. S., & Hassan, K. M. (2001). A Comparative Literature Survey of Islamic Finance and Banking. Financial Markets, Institutions & Instruments , 10 (4), pp. 155–199.

Cite this article

Munir,D.;Saleem,S.;Majeed,M.I. (2023). Shariah Compliance: An Empirical Study on the Perceptions of Islamic Financial Institutions in Pakistan. Advances in Economics, Management and Political Sciences,3,497-506.

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About volume

Volume title: Proceedings of the 6th International Conference on Economic Management and Green Development (ICEMGD 2022), Part Ⅰ

ISBN：978-1-915371-15-7(Print) / 978-1-915371-16-4(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://www.icemgd.org/
Conference date: 6 August 2022
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.3
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Abdullah, D. V., & Chee, K. (2010). Islamic finance why it makes sense. Marshall Cavendish Corp/Ccb.

[2]. Ahmad, H. (2010, February 23-26). Risk management assessment systems: An application to Islamic banks. Paper presented at the 3rd International Conference on Islamic Banking and Finance , Paper presented at the 3rd International Conference on Islamic Banking and Finance,.

[3]. Ahmad, H. (2010, February 23-26). Risk management assessment systems: An application to Islamic banks. Paper presented at the 3rd International Conference on Islamic Banking and Finance , Paper presented at the 3rd International Conference on Islamic Banking and Finance,.

[4]. Alvi, I. A. (2005, August 15). Guidelines for financial controls, operational controls and Shariah compliance. Islamic Finance

[5]. Askari, H., Iqbal, Z., & Mirakhor, A. (2009). New Issues in Islamic Finance and Economics: Progress and Challenges. Singapore: John Wiley & Sons (Asia) Pte. Ltd.

[6]. Aslam, Z. (2006, July 13). London - Key Center for Islamic Finance. Hardman & Co .

[7]. Bakar, M. (2002). The Shari'a Supervisory Board and Issues of Shari'a Rulings and Their Harmonisation in Islamic Banking and Finance. In R. Karim, & S. Archer, Islamic Finance: Innovation and Growth (pp. 74-89). London: Euromoney Books.

[8]. Banaga, A., Ray, G., & Tomkins, C. (1994). External Audit and Corporate Governance in Islamic Banks . Aldershot: Avebury.

[9]. Boyatzis, R. E. (1998). Transforming qualitative information thematic analysis and code development. Thousand Oaks, CA : Sage Publications.

[10]. Chapra, O., & Khan, T. (2000). Regulation and Supervision of Islamic Bank. Jeddah: IDB-IRTI.

[11]. Choudhury, M. A., & Hoque, M. Z. (2006). Corporate Governance in Islamic Perspective. Corporate Governance , 6 (2), pp. 116-128.

[12]. Denzin, N. K., & Lincoln, Y. S. (2003). The landscape of qualitative research: theories and issues (2nd ed.). London: Sage.

[13]. Gerrard, P., & Cunningham, J. B. (1997). Islamic banking: a study in Singapore. International Journal of Bank Marketing , 15 (6), pp. 204 - 216.

[14]. Grais, W., & Pellegrini, M. (2006). Corporate governance in institutions offering Islamic financial services – Issues and options. World Bank policy research working paper 4052 .

[15]. Haniffa, R., & Hudaib, M. (2007). Exploring the Ethical Identity of Islamic Banks via Communication in Annual Reports. Journal of Business Ethics , 76, pp. 97–116.

[16]. Hasan, A. B. (n.d.). Optimal Shariah Governance in Islamic Finance. Retrieved December 25, 2011, from http://www.bnm.gov.my/microsites/giff2007/pdf/frf/04_01.pdf

[17]. Hassan, M.-u. (2007). The Islamization of the Economy and the Development of Islamic Banking in Pakistan. Kyoto Bulletin of Islamic Area Studies, , 1 (2), pp. 92-109.

[18]. IDB, IFSB, & IRTI. (2007). Islamic Financial Services Industry Development: Ten-year Framework and Strategies. Retrieved September 2010, 17, from http://www.ifsb.org/docs/10_yr_framework.pdf

[19]. IFSB, IRTI, & IDB. (2010). Islamic Finance and Global Financial Stability 2010. Retrieved June 24, 2011, from http://www.ifsb.org/docs/IFSB-IRTI-IDB2010.pdf

[20]. IFSB. (2009). IFSB-10: Guiding Principles on Shariah Governance Systems for Institutions. Retrieved June 24, 2011, from https://ifsb.org/standard/IFSB-10%20Shariah%20Governance.pdf

[21]. Iqbal, Z. (1997). Islamic Financial Systems. Finance & Development , 34 (2), pp. 42-45.

[22]. Islamic Banking Bulletin. (2018, September).

[23]. Lahsansna, A., & Hassan, M. K. (2011). The Shariah Process in Product Development and Approval in ICM. In M. K. Hassan, & M. Maklknecht, Islamic Capital Markets: Products and Strategies (pp. 23-67). Chichester: John Wiley & Sons, Ltd.

[24]. Lee, K.-h., & Ullah, S. (2011). Customers' attitude toward Islamic banking in Pakistan. International Journal of Islamic and Middle Eastern Finance and Management , 4 (2), pp. 131-145.

[25]. Loqman, M. (1999). A brief note on the Islamic financial system. Managerial Finance , 25 (5), pp. 52 - 59.

[26]. Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis: An expanded sourcebook. London: Sage Publications.

[27]. Muhammad, T., Mamman, D., & Tangaza, M. A. (2019). Controversies and Challenges of Islamic Banking: Analysis of Regulatory Reform. Journal of Contemporary Research in Business, Economics and Finance, 1(1), 12-15.

[28]. Musa, S. A., & Daud, M. B. (2007, March 28-29). Survey on Shariah Boards of Institutions Offering Islamic Financial Services (IIFS) Across Jurisdictions. Paper presented at the 3rd Seminar on Legal Issues in the Islamic Financial Services Industry: Surveys on Legal and Shari’ah Issues .

[29]. Naser, K., & Mountinho, L. (1997). Strategic Marketing Management: The Case of Islamic Banks. International Journal of Bank Management , 15 (6), pp. 187-203.

[30]. Naser, K., Ahmad, J., & Al-Khatib, K. (1999). Islamic Banking: a Study of Customer Satisfaction and Preferences in Jordan. International Journal of Bank Marketing , 17 (3), pp. 135 - 147.

[31]. Patton, M. Q. (1990). Qualitative evaluation and research methods. Newbury Park: Sage.

[32]. Qattan, M. A. (2005). Shari'ah Supervision: The Unique Building Block of Islamic Financial Architecture. Islamic Financial Architecture: Risk Management and Financial Stability (pp. 273-287). Jakarta: Islamic Research and Training Institute.

[33]. Rahim, A. (2008). Shariah audit for Islamic financial services: the needs and challenges. Paper presented at the International Shariah Research Academy for Islamic Finance (ISRA) Islamic Finance Seminar, 11 November. Kuala Lumpur. News , 2 (16).

[34]. Rammal, H. G. (2006). The Importance of Shari'ah Supervision in Islamic Financial Institutions. Corporate Ownership and Control , 3 (3), pp. 204-208.

[35]. Rammal, H. G., & Parker, L. D. (2013). Islamic banking in Pakistan: A history of emergent accountability and regulation. Accounting History .

[36]. Rausnah, M. (2011). MARKET SEGMENTATION AND THE SHARI'AH COMPLIANCY PROCESS IN ISLAMIC BANKING INSTITUTIONS (IBIs). ISRA RESEARCH PAPER (NO. 21/2011) , 21.

[37]. Silverman, D. (1997). Qualitative Research Theory, Method And Practice (First ed.). London: Sage.

[38]. Thani, N. N. (2007). The Effectiveness of Legal and Regulatory Framework for Islamic Financial Services. In 2007 (Ed.), Paper Presented at the 3rd Seminar on Legal Issues in the Islamic Financial Services Industry: Surveys on Legal and Shari’ah Issues, 28-29 March. Kuala Lumpur.

[39]. www.kse.com.pk Retrieved Ocober 27, 2012

[40]. Vicary, D. (2005, May 16). Best practices of corporate governance in Islamic banking. Islamic Finance News , 2 (10).

[41]. Zaher, T. S., & Hassan, K. M. (2001). A Comparative Literature Survey of Islamic Finance and Banking. Financial Markets, Institutions & Instruments , 10 (4), pp. 155–199.

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