Shariah risk management practices of Islamic banks in Malaysia
Shariah risk management practices are crucial for the stability and reputation of the Islamic banking industry. Thus, the purpose of this study is to determine the factors that influence Shariah risk management practices among Islamic banks in Malaysia Islamic banking staff in the Shariah department...
Saved in:
Main Author: | |
---|---|
Format: | Thesis |
Language: | eng eng |
Published: |
2015
|
Subjects: | |
Online Access: | https://etd.uum.edu.my/4686/1/s814593.pdf https://etd.uum.edu.my/4686/2/s814593_abstract.pdf |
Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
id |
my-uum-etd.4686 |
---|---|
record_format |
uketd_dc |
institution |
Universiti Utara Malaysia |
collection |
UUM ETD |
language |
eng eng |
advisor |
Zainol, Zairani |
topic |
HD61 Risk Management HG Finance |
spellingShingle |
HD61 Risk Management HG Finance Hasna, Lumpingan Lidasan Shariah risk management practices of Islamic banks in Malaysia |
description |
Shariah risk management practices are crucial for the stability and reputation of the Islamic banking industry. Thus, the purpose of this study is to determine the factors that influence Shariah risk management practices among Islamic banks in Malaysia Islamic banking staff in the Shariah department in five (5) Islamic banks are surveyed through a questionnaire and the results are used to examine whether Shariah risk management practices is influenced by Shariah risk management process, Shariah board involvement, knowledge and expertise. Additionally, statistical method such as multiple regressions was used to test the hypothesis. This study found that Shariah risk management practices among Islamic banks in Malaysia are moderate. Other findings show that Shariah risk management practices are influenced by Shariah risk management process and expertise in both Shariah and banking operation by the employees. This explains that higher level of Shariah risk management process and expertise among staffs will lead to a higher level of Shariah risk management practices. On the other hand, two independent variables have not given much
significant influence on Shariah risk management practices. Although the response
rate is 86.08%, it represents beliefs, which are not necessarily translated into actions.
This study makes a significant contribution to the academic understanding of Shariah governance in the context of Malaysia, which may guide policy makers, bankers, and customer. It is expected that the results of this study would give realization to the regulators to strengthen and strictly promote the Shariah compliance in all Islamic banking products and services and put a greater emphasize on Shariah risk management. In addition, it is important for the Islamic financial institutions to widen
a well-organized and synchronize Shariah risk management process through understanding Shariah risk, proper identification, and assessment of the possible occurrence of the risk as well as monitoring all the products and services to control Shariah non compliance events. Lastly, the Islamic financial institution must train experts that will enhance the Shariah risk management practices through training policies in both Shariah and banking operation, proper qualification among staff and Shariah coordination in ensuring Shariah compliance to attract more customers. |
format |
Thesis |
qualification_name |
masters |
qualification_level |
Master's degree |
author |
Hasna, Lumpingan Lidasan |
author_facet |
Hasna, Lumpingan Lidasan |
author_sort |
Hasna, Lumpingan Lidasan |
title |
Shariah risk management practices of Islamic banks in Malaysia |
title_short |
Shariah risk management practices of Islamic banks in Malaysia |
title_full |
Shariah risk management practices of Islamic banks in Malaysia |
title_fullStr |
Shariah risk management practices of Islamic banks in Malaysia |
title_full_unstemmed |
Shariah risk management practices of Islamic banks in Malaysia |
title_sort |
shariah risk management practices of islamic banks in malaysia |
granting_institution |
Universiti Utara Malaysia |
granting_department |
Othman Yeop Abdullah Graduate School of Business |
publishDate |
2015 |
url |
https://etd.uum.edu.my/4686/1/s814593.pdf https://etd.uum.edu.my/4686/2/s814593_abstract.pdf |
_version_ |
1747827780616192000 |
spelling |
my-uum-etd.46862021-03-18T08:06:10Z Shariah risk management practices of Islamic banks in Malaysia 2015 Hasna, Lumpingan Lidasan Zainol, Zairani Othman Yeop Abdullah Graduate School of Business Othman Yeop Abdullah Graduate School of Business HD61 Risk Management HG Finance Shariah risk management practices are crucial for the stability and reputation of the Islamic banking industry. Thus, the purpose of this study is to determine the factors that influence Shariah risk management practices among Islamic banks in Malaysia Islamic banking staff in the Shariah department in five (5) Islamic banks are surveyed through a questionnaire and the results are used to examine whether Shariah risk management practices is influenced by Shariah risk management process, Shariah board involvement, knowledge and expertise. Additionally, statistical method such as multiple regressions was used to test the hypothesis. This study found that Shariah risk management practices among Islamic banks in Malaysia are moderate. Other findings show that Shariah risk management practices are influenced by Shariah risk management process and expertise in both Shariah and banking operation by the employees. This explains that higher level of Shariah risk management process and expertise among staffs will lead to a higher level of Shariah risk management practices. On the other hand, two independent variables have not given much significant influence on Shariah risk management practices. Although the response rate is 86.08%, it represents beliefs, which are not necessarily translated into actions. This study makes a significant contribution to the academic understanding of Shariah governance in the context of Malaysia, which may guide policy makers, bankers, and customer. It is expected that the results of this study would give realization to the regulators to strengthen and strictly promote the Shariah compliance in all Islamic banking products and services and put a greater emphasize on Shariah risk management. In addition, it is important for the Islamic financial institutions to widen a well-organized and synchronize Shariah risk management process through understanding Shariah risk, proper identification, and assessment of the possible occurrence of the risk as well as monitoring all the products and services to control Shariah non compliance events. Lastly, the Islamic financial institution must train experts that will enhance the Shariah risk management practices through training policies in both Shariah and banking operation, proper qualification among staff and Shariah coordination in ensuring Shariah compliance to attract more customers. 2015 Thesis https://etd.uum.edu.my/4686/ https://etd.uum.edu.my/4686/1/s814593.pdf text eng public https://etd.uum.edu.my/4686/2/s814593_abstract.pdf text eng public masters masters Universiti Utara Malaysia Abdullah M., Shahirni, S., & Ismail A.G (2011). Operational Risk in Islamic Banks: Examination of Issue. Qualitative Research in Financial Markets Vol. 3 No. 2, 2011 pp. 131-151. Abu Hussain, H. & Al-Ajmi, J. (2012). Risk management practices of conventional and Islamic banks in Bahrain. The Journal of Risk Finance, 13(3), 215-239 Ab.Aziz, M.R., Shukor, S.A., & Abdullah, W.Z. (2014). A Specific Analysis of Service Quality Dimensions on Customer Satisfaction and Customer Loyalty: A Study of Al-Ijarah Thumma Al-Bai' (AITAB) and Vehicle Financing-i (Bai' Bithaman Ajil-BBA). Journal of Emerging Issues in Economics, Finance and Banking (JEIEFBB). An Online International Monthly Journal (ISSN: 2306-367X) 2014 Vol: 3 Issue 2. Ahmad, F.U. A., Raashed R., & Ali, M.M. (201 3). How Shari'ah-compliant is Islamic Banking?. Proceeding of Sharia Economics Conference-Hannover, 9 February 2013. Ahmad N.H., Abubakar A.F., & Isa, M.Y. (2009). Islamic Risk Management Practices. Paper presented in 11th MFA Conference, Bayview Beach, Penang 3rd-5th June 2009. Ahmed, H. (2011). "Shari'ah governance regimes for Islamic finance: types and appraisal", Journal of lnstitute of International Economics, Vol. 44 No. 4, pp. 393-411. Ajzen, I., & Fishbein, M. (1980). Understanding attittudes and predicting social behavior. England Cliffs, NJ: Prentice Hall. Ali, A. (2003). "The emerging Islamic financial architecture: the way ahead", Islamic Finance: Dynamics and Development: Proceedings of the Fifth Harvard University Forum on Islamic Finance, Center for Middle Eastern Studies, Harvard University, Cambridge, MA, pp. 147-159. AAOIFI. (2010). Governance Standards for Islamic Financial Institutions, AAOIFI, Bahrain. Apgar, D. (2006). Risk Intelligence: Learning to Manage What We Don 't Know, Harvard University Press, Boston, MA. Al-Tamimi, H. A. H., & Al-Mazrooei, F. M. (2007). Banks' risk management: a comparison study of UAE national and foreign banks. The Journal of Risk Finance, 8(4), 394-409. Anderson, J.C., & Gerbing, D.W. (1998). Structural equation modeling in practice: A review and recommended two-step approach. Psychological Bulletin, 103 (3), 411-423. Archer, S. & Abdullah H. (2007). "Operational risk exposures of Islamic banks", in Archer, S. and Karim, R A. (Eds), Islamic Finance: Regulatory Challenges, Wiley, Singapore,pp. 121-31. Aznan, H. (2007). Optimal Shariah Governance in Islamic Finance. PDF. Retrieved May 3, 2014. From: http://www.nzibo.com/IB2/04_ 01.pdf. Balz, K. (2008). "Shari'ah risk? How Islamic finance has transformed Islamic contract law", Occasional Publications 9, Islamic Legal Studies Program, Harvard Law School, in Ginena Karim (2014). Shariah Risk and Corporate Governance of Islamic Banks. Journal of Corporate Governance Vol. 14 NO. 1 2014, pp. 86-103. Bank Negara Malaysia. (2010). Shariah Governance Framework for Islamic Financial Institutions. Kuala Lumpur: Bank Negara Malaysia. Basel Committee on Banking Supervision (2001). Customer Due Diligence for Banks, BCBS, Switzerland. Basel Committee on Banking Supervision (2005). Compliance and the Compliance Function in Banks, BCBS, Switzerland. Bhatti, M.A., Hee, H.C., & Sundram, V.P.K. (2012). A Guide for Beginners: Data Analysis Using Spss and Amos. Kuala Lumpur: Pearson Malaysia Sdn. Bhd. Blau, G.J. & Boal, K.R. (1987). Conceptualizing how job involvement and Organizational commitment affect turnover and absenteeism Academy of Management Review, 12(2), 288-300. Cavana, R.Y., Delahaye, B.L., & Sekaran, U. (2001). Applied Business Research: Qualitative and Quantitative methods, Wiley & Sons. Chapra, M. & Ahmed, H. (2002). Corporate Governance in Islamic Financial Institutions, Islamic Development Bank, Jeddah. Chik, M. N. (2013). Shariah Governance framework-shariah compliancerisk management. 4th Asia Islamic Banking Conference 2013. Coakes, S.J. & Steed, L.G. (2003). SPSS: Analysis without Anguish. Australia: John Wiley & Sons, Ltd. Creswell, J. W., (2008). Educational research: Planning, conducting, and evaluating quantitative and qualitative research (3rd). Upper Saddle River, NJ: Prentice Hall. Churchill, G. & Lacobucci, D. (2004). Marketing research: Methodolofical foundations (9th ed). Ochio. Thomson South-Western. Cooper, D. R., & Schindler, P. S. (2003). Business Research Methods (8th edition). USA: McGraw-Hill. Davis, J.S. & I. Solomon. (1987). Experience, Expertise and Expert-Performance Research in Public Accounting. Journal of Accounting Literature 8: 150-64. DeLoach, J. (2012). Key elements of the risk management process. Retrieved from http://www.corporatecomplianceinsights.com/key- elements-of-the-riskmanagement-process/. DeLorenzo, Y. (2007). Shari'ah compliance risk. Chicago Journal of lnternational Law, Vol. 7 No. 2, pp. 397-408. DeLorenzo, Y. & McMdlen, M. (2007). "Law and Islamic finance: an interactive analysis", in Archer, S. and Abdel Karim, R.(Eds), Islamic Finance: The Regulatory Challenge, John Wiley & Sons, Singapore, pp. 132-197. De-Alwis, R. S., & Hartmann, E. (2008). The use of tacit knowledge within innovative companies: knowledge management in innovative enterprises. Journal of Knowledge Management. Vol. 12 No. 1 2008, pp. 133-147. De Zoysa, S. & Russell, A.D. (2003). 'Knowledge-based risk identification in infrastructure projects, Canadian Journal of Civil Engineering, Vol. 30 No. 3, pp. -22. Eick, C. (2003). Auburn University, ProQuest, UMI Dissertations Publishing, 2003. 3095782. El Baltaji, D. (2010). Gulf States May Have Single Shariah Council for Banks by 2013, Hassan Says. Retrieved from http://www.bloomberg .com/news/2010-06-10/gulf-states-may-have-single -shariah-council--banks-by-2013-hassansays.html. El Hawary, D., Grais, W. & Iqbal 2. (2004). Regulating Islamic Financial Institutions: The Nature of the Regulated. World Bank Policy Research Paper 3227, March 2004. Eraut, M. & W. Hirsch (2007). The Significance of Workplace Learning for Individuals, Groups and Organisations. SKOPE Monograph 9, Oxford University Department of Economics. Frankfurt School (n.d). Certified Expert in Risk Management Retrieved from http://www.frankfurt- school.com.de. George, D., & Mallery, P. (2006). SPSS for Windows: Step by step. A simple Guide and reference 10.0 update. Boston: Allyn & Bacon. Gibbins, M. & Jamal, K (1993). Problem-Centred Research and Knowledge-Based Theory in the Professional Accounting Setting. Accounting, Organizations and Society 5: 451-466 Ginena, K. (2014). Shariah Risk and Corporate Governance of Islamic Banks. Journal of Corporate Governance Vol. 14 No. 1 2014, pp. 86-103, Global Islamic Finance Forum Report (2012). Internationalisation of Islamic Finance: Bridging Economies. Kuwait Finance House Research LTD. Gorelick, C., Milton, N.J. & April, K. (2004), Performance through Learning: Knowledge Management in Practice, Elsevier Butterworth-Heinemann, Burlington, MA. Grant, R.M. (1997). The knowledge-based view of the firm: implications for management practice, Long Range Planning, Vol. 30 No. 3, pp. 450-4. Hair, J.F., Anderson,R.E., Tatham, R.L., & Black, W.C., (2006). Multivariate Data Analysis (6th ed.). Upper Saddles fiver, NJ: Pearson Education. Hair, J.F., Black, W. C., Babin, B. J., & Anderson, R.E., (2010). Multivariate Data Analysis (7th ed.). Upper Saddles fiver, NJ: Pearson Education. Hamza, H. (2013). Shariah Governance in Islamic banks: Effectiveness and Supervision model. International Journal of Islamic and Middle Eastern Finance and Management Vol. 6 No. 3, 2013 pp. 226-237. Hanefa, M.M., Shafil Z., Salleh S., & Zakaria, N. (2012). Governance and Shariah Audit in Islamic Financial Institutions. USIM Publisher 2012. Hasan, A. (2007). Optimal Shariah Governance in Islamic Finance. PDF. Retrieved May 3, 2014. From http://www.nzibo.com/IB2/04_ 01.pdf. Hassan, A. (2009). Risk management practice of Islamic banks of Brunei Darussalam. The Journal of Risk Finance, 10(1), 23-37. Hasan, Z. (2011). A Survey on Shariah Governance practices in Malaysia, GCC Countries And the L . Critical appraisal. International Journal of Islamic and Middle Eastern Finance and Management. Vol. 4 No. l, 2011, pp. 30-51. Hasna, L., Saiful, M.I., Wan, M., Zabidi, A., Badrul, H., Jatikusma, S., & Warsame, E. (2014). Risk and Risk Management in Islamic financing contract: Issues and challenges. Research paper on Islamic risk management BWRR 5043. Universiti Utara Malaysia Henry, R. (2014). Risk Oversight Retrieved June 20, 2014 from http://www.corpgov.deloitte.com/ site/us/board-governance/risk-oversight/. Hinkin, T.R.,& Tracey, J.B. (1999). An Analysis of Variance Approach to Content Validation. Organizational Research Methods. 2(2), 175-186 IFSA (2013). Laws of Malaysia act 759. Islamic Financial Service Act 2013. IDB & IFSB (2007). Islamic Financial Services Industry Development: Ten-year Framework and Strategies, IFSB, Kuala Lumpur. Islamic Finance News (2013). IFN Shariah Scholars Survey: The results are in!. Islamic Finance News, September, 2013. Islamic Financial Services Board (2005). Guiding principles of risk management for institutions (other than insurance institutions) offering only Islamic Financial services, IFSB, Kuala Lumpur. Islamic Financial Services Board (2007a). Guidance on Key Elements in the Supervisory Review Process of Institutions Offering Islamic Financial Services, IFSB, Kuala Lumpur. Ismail, A. G. (2010). Money, Islamic Banks and the Real Economy. pg. 242, Cengage Learning, UIC Building Singapore. Karim, A. & Archer S. (2013). Islamic Finance: The new regulatory challenge. John Wiley and Sons. April 2013, Business and Economics. Khalid, S., & Amjad, S. (2012). Risk Management practices in Islamic banks of Pakistan. The Journal of Risk Finance Vol. 13 No. 2, 2012 pp. 148-159. mKhan, F. (2010). How 'Islamic' is Islamic Banking?. Journal of Economic Behavior & Organization 76 (2010) 805-820. Khan, H.N., & Asghar, N. (2012). Customer Awareness and Adoption of Islamic Banking in Pakistan. Interdesciplinary Journal of Contemporary Research in Business. 359-366. KPMG (2009). Never again? Risk management in banking beyond the credit crisis. KPMG International. Krejcie, R.V., & Morgan, D.W., (1970). Determining sample size for research activities. Educational & Psychological Measurement, 30, 607-610. Lahsasna, A. (2014). Shariah Non-compliance Risk Management and Legal Documentations in Islamic Finance (Wiley Finance). Leventis, S., Dimitropoulos, P. & Owusu-Ansah, S. (2013). Corporate governance and accounting conservatism: evidence from the banking industry, Corporate Governance: An international Review, Vol. 21 No. 3, pp. 264-286. Lucky, I.O.E, (2011). Entrepreneurial Performance and Firm Performance. Are They Synonymous? A PhD Experience. International Journal of Business and Management Tomorrow. 1(2), 1-6 Magalha-es, R. & Al-Saad, S. (2013). Corporate governance in Islamic financial institutions: the issues surrounding unrestricted investment account holders, Corporate Governance, Vol. 13 No. 1, pp. 39-57. Magdy, A. S. (2013). The importance of Knowledge in Islam. Retrieved from http://www.slideshare.net/dralamin/the- importance-of-knowledge-in-islam. Makiyan, S. N. (2008). Risk management and challenges in Islamic Banks. Journal of Islamic Economics, Banking and Finance, 4 (3). Malhotra, N.K, & Stanton, S.C. (2004). Validating Inter-Object Interaction in Object Oriented Designs. In: 4th IASTED International Conference on Modeling Stimulation and Optimization, Kauai, Hawaii, USA. Man, Y. (2006). Factors affecting customer's trust in online banking information systems management option. An Honours Degree project, Hong Kong Baptist University, Hong Kong. Massingham, P. (2010). Knowledge risk management: A framework. Journal Of Knowledge Management Vol. 14 No. 3 2010, Pp. 464-485, Q Emerald Group Publishing Limited, ISSN 1367-3270. Mayer, K. J. (1999). Exploring the role service process and its effect on guest encounter satisfaction (Doctoral Dissertation Graduate college, University of Nevada, Las Vegas, 1999). Ann Arbor, MI: UMI Dissertation Services. May, W. (2012). Knowledge, Skills and Abilities Needed for Effective Risk Management. Global Association of Risk Professionals February 2012 Retrieved, 15, 2014 from Available at www.garp.org/media/880337/ebs_021512.pdf. McLintire, S. A., & Miller, L. A., (2007). Foundations of psychological testing: a practical approach. 2nd ed. Thousand Oaks, CA: Sage Publications. Meyers, L., Gamst, G., & Guarino, A.J. (2012). Applied Multivariate Research: Design and Interpretation. (2nd ed). SAGE Publications, Inc Nachmias, C.F., & Zoubi, M. (1996). Research methods in the social sciences. London: Arnold. Neil, J., (2009). Exploring Research: New Jersey: Pearson Education International, Inc. Nicole, S. (2013). The Board's Role in Managing Risk and Corporate Governance. The Wall Street Journal. Retrieved from http://www.corpgov.deloitte.com/ site/us/board-governance/risk-oversight/. Nunnally, J.C., & Bernstein, J.H., (1994). Psychometric Theory (3rd edition). New York: McGraw-fill. Nunally, J.C., (1978). Psychometric Theory, 2nd ed. New York: McGraw-Hill. Olam (2012). Risk Management. International Limited. Annual Report 2010, pg. 49. Osman, M.R., & Ali, H. (2008). Exploring Muslim Entrepreneurs Knowledge and Usage of Islamic Financing. Seminar Keusahawanan Islam 11 Peringkat Kebangsaan. (pp. 1-26). Pallant, J. (2013). SPSS Survival Manual, 5th Edition New York: McGraw-fill. Pasha, S. (2010). Investment Dar battle with Blom adds sharia risk-Moody's. Retrieved March 14, 2014 from http://www.arabianbusiness.com/589134-investment -dar-battle-with-blom-adds-sharia-risk-moodys. Qadri, M.H.S Z. N. (n.d). Knowledge, Excellence and Importance in Shariah Retrieved March 20, 2014 from: http://www.ziaislamic.com/english/ BOOKCMSENG/book.php?name=Knowledge%20Excellence %20and%20Importance&ids=357. Rahman, A.R, Noor S. B., & Tariq I. (2013). Governance and Risk Management:m Empirical evidence from Malaysia and Egypt. International Journal of Finance & Banking Studies IJFBS Vo1. 2 No. 3, 2013 ISSN: 2147-4486. Reza, D. (2008). Mitigating legal risk in Islamic banking operations, Humanomics, Vol. 24 ISS: 2, pp. 110-121. Roscoe, J.T., (1975). Fundamental Research Statistics for the Behavioral Sciences, 2nd edition. New York: Holt Rinehart & Winston. Rosman (2009). Risk Management Practices and Risk Management Processes of Islamic Banks: A Proposed Framework. International Review of Business Research Papers Vol. 5 No. 1 January 2009 Pp. 242-254. Sekaran, U. (2003). Research Methods for Business. A Skill Building Approach (4th ed.). NY: John Wiley and Sons, Inc. Sekaran, U., & Bougie, R. (2013). Research Methods For Business: A Skill Building Approach. 6th ed, Wiley. Sekreter, A. (2011). Sharing of risks in Islamic finance, IBSU Scientific Journal (IBSUSJ), ISSN 1512-3731, Vol. 5, Iss. 2, pp. 13-20. Sohail, S.M., & Salina, D. (2009). Knowledge Sharing in Higher Education Institutions Perspective of Malaysia.The Journal of Information and Knowledge Management Systems. 39(2), 125-142. Standard & Poor's. (2008). Islamic Finance Outlook 2008. Retrieved November 20, 2014 from http://www.scribd.com/doc/2901342/Islamic- Finance-Outlook-2008. Sulaiman, N. (2013). Shariah Non-compliance and Risk management. 10th Kuala Lumpur Islamic Finance Forum 2013. Kuala Lumpur Malaysia. The Banker Report. The Banker Global Financial Intelligence since 1926. Retrieved July, 20, 2014 from http://www.thebanker.com. Ward, A. (2014). Information, Knowledge and Expertise. Retreived March 20, 2014 From http://contarmedia.com/infor mation-knowledge-and-expertise/. Wardhani, N. & Arshad, S. (2012). The role of Shariah Board in Islamic Banks: A Case Study of Malaysia, Indonesia and Brunei Darusallam. Paper presented in 2nd ISRA Colloquium 2012 Sasan Kijang, Bank Negara Malaysia. Zahari, Z., & Shanmugam, B. (2009). A Primer on Islamic Finance, Research Foundation Publications of CFA Institute, Charlottesville, VA, Zahra, S. & Pearce, J. (1989). "Board of directors and corporate financial performance: a review and integration model", Journal of Management, Vol. 15 NO. 2, pp. 291-344. Zainol, Z., Shaari, R., & Ali, H. (2008). A comparative Analysis of Banker's Perception on Islamic Banking. International Journal of Business Management, 157-168. Zikmund, W.G., Babin, B.J., Carr, J.C., & Griffin, M. (2010). Business Research Methods (8& Ed.) Mason, OH: Thompson South Western. Quran verses and hadith Quran.com Sunnah.com |