A Study on the Need for VBI in Malaysian Islamic Financial Industry and its Shari'ah Perspective

Mohammad Bilal Khan(1*)

(1) International Islamic University, Malaysia
(*) Corresponding Author

Abstract


The purpose of this paper is to highlight the need for Value-Based Intermediation (VBI) in Malaysia introduced by Bank Negara Malaysia (BNM) in March 2018, under the guidance of Shari'ah Advisory Council (SAC), which is the decisive authority in matters relating to Shari'ah, analyse the aim of VBI against that of SDGs in the light of Maqasid al-Sahri'ah, and to assess VBI from the perspective of Shari'ah. The growth of Islamic banking in Malaysia experienced a boost where the market share of Islamic banking assets grew from 7.1% in 2010 to 28% in 2016, but there has been a decline in Islamic finance's annual growth from 24.2% in 2011 to only 8.2% in 2016. There could be various reasons for this decline, such as maintaining a steady growth requires constant innovation in the products and services offered. However, innovation becomes difficult in case of IFIs, since they have to comply with legal and Shari'ah rules at the same time. Qualitative method of study is used for this paper.  It is found in the study that VBI not only conforms with the principles of Shari'ah but also re-focuses IFIs to achieve the objectives of Shari'ah or fulfill Maqasid al-Shari'ah. The study also found that VBI is also in line with the SDGs, which are human-made goals presented to the world by United Nations around 2012. However, while SDGs are prone to changes and criticism, the objectives, or goals of Shari'ah are holistic, permanent, and divine. VBI is a concept applicable only in Malaysia's Islamic Finance Industry until the time this paper is written, and therefore, it focuses only on the Malaysian IFI. There is a need to understand why VBI was needed in Malaysian IFI despite each Islamic bank having their own Shari'ah committee and SAC of BNM and this paper will help develop that understanding. 


Keywords


Value-based intermediation (VBI), Shari'ah, Maqasid al-Shari'ah, SDGs, IFI, Malaysia.

Full Text:

PDF

References


Abu Bakar, M. Y. (2017). How Does Values-Based Banking Counter Unfair Terms in Consumer Contracts and Notices in Islamic Banks in Malaysia? . Proceeding of the 4th International Conference on Management and Muamalah 2017 (ICoMM 2017) e-ISBN: 978-967-2122-15-9.

Agrobank. (2018). Agrobank Signed Agreement Of RM 112 Million Banking Facilities With Salcra. Agrobank M Bhd rethrieved from https://www.agrobank.com.my/product/paddy-i-tawarruq/.

Ahmad Sarkawi et.al. (2017). THE PHILOSOPHY OF MAQASID AL-SHARI’AH AND ITS APPLICATION IN THE BUILT ENVIRONMENT. Journal of Built Environment, Technology and Engineering, Vol. 2 (March) ISSN 0128-1003.

Ahmed H. &. Qaradawi Y. (2004 & 1999). Roles of Zakah and Awqaf in Poverty Alleviation & Fiqh al zakah (Volume 1): A comparative study of zakah, regulations and philosophy in the light of Quran and Sunnah. Jeddah: Islamic Development Bank; Saudi Arabia.

Al-Omar, F. e. (1996). Islamic Banking Theory, Practise and Challenges,. Oxford University Press.

BIMB. (2016). Sustainability Report. BIMB holdings Bhd retrieved from http://bimb.irplc.com/investor-relations/sustainablility/pdf/BIMB%20-%20SR%202016.pdf.

BNM. (2018). Value-based Intermediation:Strengthening the Roles and Impact of Islamic Finance . Bank Negara Malaysia: Strategy Paper.

BNM. (2019). “Guidance Documents on VBI,” . retrieved from https://www.bnm.gov.my/index.php?ch=en_announcement&pg=en_announcement&ac=670.

BNM. (March, 2018). “Value-based Intermediation: Strengthening the Roles and Impact of Islamic Finance". retrieved from http://www.bnm.gov.my/index.php?ch=57&pg=137&ac=612&bb=file.

Chapra. (2008). The Islamic Vision of Development in the Light of the Maqasid Al Shariah. The International Institute of Islamic Thought (IIIT), Occasional papers series 15, London.

Farhah & Razina. (2018). Malaysian Experience with the VBI approach. Research Gate.

N. A. (5-6th December, 2016). Unfair Terms in Islamic Banking Contracts: Realising Maqasid al-Shari‘ah towards Banking Consumer Protection in Malaysia. Presented at the 1st International Conference on Islam & Contemporary Issues in the Islamic World: Challenges & Way Forward,.

Subramaniam, P. (October, 2018). The Wall: Islamic Finance: Value-based intermediation to reinvigorate industry. TheEdgeMarkets retrieved from https://www.theedgemarkets.com/article/wall-islamic-finance-valuebased-intermediation-reinvigorate-industry.

UN. (2015). Department of Economic and Social Affairs: Sustainable Development. Retrieved from United Nations sdg's: https://sdgs.un.org/goals

Uzaimah Ibrahim et.al. (2012). Conflicts Facing Islamic Banking in Malaysia: Dual Banking System Versus Dual Legal System. Australian Journal of Basic and Applied Sciences,.

Zain, E. R. (2018). “Implementing Islamic social finance: challenges and proposed solutions”,. ISFIRE Magazine, 72-81.

Zakariah, Z. (2017, July). Market share of Islamic banks up to 28pct in 2016. Retrieved from NewStraitTimes: https://www.nst.com.my/business/2017/07/259228/market-share-islamic-banks-28pct-2016




DOI: https://doi.org/10.21154/elbarka.v4i2.2616

Refbacks

  • There are currently no refbacks.


Copyright (c) 2021 Mohammad Bilal Khan

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

This Journal Indexed by:

 

 

EL BARKA: Journal of Islamic Economics and Business
Faculty of Islamic Economics and Business
Institut Agama Islam Negeri (IAIN) Ponorogo
Kampus II Pintu, Jenangan, Ponorogo, Indonesia