The research aims to identify the main macro objectives (maqāṣid) of Sharīʿah that regulators are supposed to realize in the laws and regulations governing Islamic financial institutions (IFIs). It also aims to assess the compliance level of selected Islamic finance laws and regulations in Malaysia vis-à-vis those maqāṣid.
The research starts with the conceptual framework of Islamic finance regulations, which addresses the objectives enshrined in legislative acts and in the guidelines promulgated by the Central Bank of Malaysia (Bank Negara Malaysia – BNM). The laws and regulations range from acts such as Islamic Financial Services Act (IFSA) 2013 to guidelines that address prudential and liquidity practices, market structure and competition, consumer protection, corporate governance, and standardization of Sharīʿah and operational requirements, to mention but a few. This legal and regulatory environment has succeeded to a great extent in strengthening Sharīʿah compliance via the robust Shariah Governance Framework (SGF) issued in 2010 and the special status accorded to the Shariah Advisory Council (SAC) of BNM. The latter has been made the ultimate reference in matters related to Islamic banking and finance, such that the civil courts must refer to its judgments in determination of matters of Islamic jurisprudence. This alone should bring about a regulatory environment that guarantees
Sharīʿah compliance and, hence, compliance with the maqāṣid.
After explaining the overall environment of Islamic finance in Malaysia, the research discusses some obstacles to Islamic finance regulations in Malaysia that make it difficult to fully realize maqāṣid al-Sharīʿah. These obstacles are mainly:
1 ‘Leveraging’ whereby Islamic finance regulations are deemed subordinate to conventional banking regulations in a dual banking system.
2 ‘Harmonization’ between Sharīʿah and law in a way that has led, according to many legal experts, to a lack of differentiation between Islamic and conventional financial 22 products. The objective of product development in the Islamic finance industry has been the replication of conventional financial products rather than innovation.
3 As a result of the first and second issues, extensive use of ḥiyal (legal stratagems) has emerged in the structuring of Islamic financial products, which Islamic finance regulations have failed to stop.
The research acknowledges that these three issues must be addressed in Islamic finance regulations to fully realize maqāṣid al-Sharīʿah. This is important to mitigate the reputational risk that could hinder the acceptability of Islamic finance to allstakeholders.
The research then proceeds to scrutinize some regulations in terms of their compliance
with maqāṣid al-Sharīʿah. It has selected regulations pertaining to Sharīʿah governance, prudential and risk management regulations, market practice and consumer protection, financial technology (fintech) and policy documents outlining the Sharīʿah and operational requirements of Islamic financial institutions in Malaysia...
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