Unveiling the terrain of non-bank Islamic personal financing: current practices, challenges, and future prospects

Ibtisam @ Ilyana Ilias, Mastika Nasrun, Nurul Aini Muhamed
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Abstract

Purpose

This study aims to investigate the current practices among selected non-bank financial institutions (NBFIs) in Malaysia in offering Islamic personal financing and the multiple challenges faced by them.

Design/methodology/approach

The qualitative research methodology was used, and primary data was collected using semi-structured interviews with 10 respondents consisting of NBFIs’ representatives and Shariah advisors.

Findings

Most Islamic personal financing practice is based on tawarruq. Among the major challenges faced by NBFIs are the absence of a comprehensive legal framework, Shariah non-compliance risks, cost, human resources and risk management. Recommendations include establishing a proper legal framework and Shariah governance. The study also recommends centralising at the regulatory level aspects such as training, commodity murabahah system and the department performing the Shariah advisory and control functions.

Research limitations/implications

Online interviews were conducted during the early wave of the COVID-19 pandemic in 2020 with a limited number of respondents due to people’s hesitancy to participate during the pandemic.

Practical implications

The findings will guide regulators and industry players concerning the challenges that must be addressed and the recommendations that can be considered in ensuring complete adherence to Shariah principles for the offering of personal financing. Eventually, Muslim society in need of cash will benefit from the broader choice of Shariah-compliant personal financing.

Social implications

The research highlights the weaknesses of self-regulation in guaranteeing Shariah compliance and the need for regulatory intervention.

Originality/value

This is a pioneering empirical study that investigated the offering of Islamic personal financing among NBFIs in Malaysia, the challenges and the way forward.

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揭开非银行伊斯兰个人融资的面纱:当前做法、挑战和未来前景
本研究旨在调查马来西亚部分非银行金融机构(NBFIs)在提供伊斯兰个人融资方面的现行做法及其面临的多重挑战。本研究采用定性研究方法,通过对 10 名受访者(包括 NBFIs 代表和伊斯兰教法顾问)进行半结构式访谈来收集原始数据。非银行金融机构面临的主要挑战包括缺乏全面的法律框架、违反伊斯兰教法的风险、成本、人力资源和风险管理。建议包括建立适当的法律框架和伊斯兰教法管理。研究的局限性/影响在线访谈是在 2020 年 COVID-19 大流行的初期进行的,由于人们在大流行期间不愿参与,因此受访者人数有限。最终,需要现金的穆斯林社会将从更广泛的符合伊斯兰教法的个人融资选择中获益。社会影响研究强调了自律在保证符合伊斯兰教法方面的弱点,以及监管干预的必要性。
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来源期刊
CiteScore
4.80
自引率
22.70%
发文量
78
期刊介绍: The journal provides a dynamic forum for the advancement of accounting and business knowledge based on Shari’ah and Islamic activities that have an impact on the welfare of society. JIABR publishes articles on the interplay between Islamic business ethics, accounting, auditing and governance, in promoting accountability, socio-economic justice (adl) and everlasting success (al-falah). It seeks to inform, among others, current theoretical and empirical research and practice in Islamic accounting, auditing and corporate governance, management of Islamic organizations, accounting regulation and policy for Islamic institutions, Shari’ah auditing and corporate governance, financial and non-financial performance measurement and disclosure in Islamic institutions and organizations. All styles of research, theoretical and empirical, case studies, practice-based papers and research notes that are well written and falling within the journal''s scope, are generally welcomed by the journal. Scope/Coverage Development of accounting, auditing and corporate governance concepts based on Shari’ah Socio-political influence on accounting and auditing regulation and policy making for Islamic financial institutions and organizations Historical perspectives on Islamic accounting, auditing and financial management Critical analysis on issues and challenges on accounting disclosure and measurement, Shari’ah audit and corporate governance Controls and risks in Islamic organizations Financial and non-financial performance measurement and disclosure.
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