Shariah Governance in Islamic Financial Institutions in Indonesia and Malaysia: A Comparative Analysis

Authors

  • Muhammad Nazmi Mohd Asri
  • Mukhtar Arif Siraj
  • Elsha Robbi Mighfari
  • Rizal Nazaruddin Firli

Abstract

Islamic finance and banking in Indonesia and Malaysia have seen significant growth regionally and globally due to the effective implementation of Shariah Governance (SG) in their respective Islamic Financial Institutions (IFIs). Hence, this study aimed to comparatively analyse Shariah Governance frameworks practiced in IFIs in these two countries. The study adopted a qualitative analysis based on a case study of SG in Indonesia and Malaysia. Official documents and policies, particularly Shariah Governance Policy Document 2019 in Malaysia and Peraturan Bank Indonesia 2009 in Indonesia, were comparatively analysed according to the responsibilities of the Board of Directors, senior management, Shariah supervisory board and Shariah compliance culture. The study found that SG in Indonesia and Malaysia has several similarities and differences in its SG practices. SG in Indonesia is observed to be not as comprehensive as in Malaysia as the Board of Commissioners and Board of Directors in Indonesian IFIs do not have an active responsibility in SG as compared to Malaysia. Furthermore, SG in Indonesia does not require the establishment of Shariah control functions, and there is also a lack of a robust Shariah non-compliance (SNC) risk management when compared to Malaysia. Nevertheless, the authors believe that the internal policies of Indonesian IFIs would address these issues and strive to enhance the robustness of their SG practices. In the end, the authors hope that the findings from this study would fill the knowledge gap with new developments in SG in Indonesia and Malaysia.

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Published

2020-12-30

How to Cite

Muhammad Nazmi Mohd Asri, Mukhtar Arif Siraj, Elsha Robbi Mighfari, & Rizal Nazaruddin Firli. (2020). Shariah Governance in Islamic Financial Institutions in Indonesia and Malaysia: A Comparative Analysis. Journal of Islamic Finance, 9(2), 146–154. Retrieved from https://journals.iium.edu.my/iiibf-journal/index.php/jif/article/view/492

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