Contemporary Responses to The Criticism of Islamic Banks in Malaysia
DOI:
https://doi.org/10.13135/2421-2172/4307Keywords:
Issues and challenges, criticisms, Islamic banks, Islamic banking and finance, MalaysiaAbstract
The rapid growth of Islamic banks has become a focus of all investors and consumers. Malaysia has put in a lot of effort to develop and gather acceptance from all citizens of the country for Islamic banking. Hence, throughout the sector’s expansion, there have been several critics, such asshariah scholars, investors, and consumers. For instance; a lack of shariah experts in both economics and shariah itself, interest rates as benchmark, similarities with conventional banks etc. As the Malaysian Islamic banking system is growing and expanding, as are its critics. Therefore, the main purpose of this study to provide adequate arguments on the contemporary criticisms and challenges being faced by Islamic banks in Malaysia. This study has adopted a qualitative approach; conducting semi-structured interviews and observations. The findings recognised shariah compliancy, interest rates as a benchmark, and a lack of shariah scholars are the most pertinent current issues for Islamic banks in Malaysia. Through the supports of scholars, policy makers, and consumers, these issues can be resolved over time with Islamic finance literacy. The outcome of this study may benefit policy makers, investors, Muslim consumers, as well as stakeholders of Islamic banking and finance.
References
Abdul-rahman, A., Latif, R. A., Muda, R., & Abdullah, M. A. (2014). Failure and potential of profit-loss sharing contracts : A perspective of New Institutional , Economic ( NIE ) Theory. Pacific-Basin Finance Journal, 2864377, 1–16. https://doi.org/10.1016/j.pacfin.2014.01.004
Abosedra, S., & Bernard, B. S. (2018). Finance-Growth Volatility Nexus: Evidence from Lebanon. Asian Economic and Financial Review, 8(4), 466–477. https://doi.org/10.18488/journal.aefr.2018.84.466.477
Ahmed, F., Manwani, A., & Ahmed, S. (2018). Merger & acquisition strategy for growth , improved performance and survival in the financial sector. Jurnal Perspektif Pembiayaan Dan Pembangunan Daerah, 5(4), 196–214.
Akhatova, M., Zainal, M. P., & Ibrahim, M. H. (2016). Banking Models and Monetary Transmission Mechanisms in Malaysia : Are Islamic Banks Different ? Economic Papers, 35(2), 169–183. https://doi.org/10.1111/1759-3441.12131
Alam, M. K., Ab, S. R., Mustafa, H., Shah, S. M., & Hossain, M. S. (2019). Shariah governance framework of Islamic banks in Bangladesh: practices , problems and recommendations. Asian Economic and Financial Review, 9(1), 118–132. https://doi.org/10.18488/journal.aefr.2019.91.118.132
Aldarabseh, W. M. (2019). Factors Associated with Taking out a Personal Finance from Islamic Banks : A Study from Almadinah , Saudi Arabia. Journal of Islamic Banking and Finance, 7(1), 27–33. https://doi.org/10.15640/jibf.v7n1a3
Ali, H., Abdullah, R., & Zaini, M. Z. (2019). Fintech and Its Potential Impact on Islamic Banking and Finance Industry : A Case Study of Brunei Darussalam and Malaysia. International Journal of Islamic Economics and Finance, 2(1), 73–108.
Ali, M., & Raza, S. A. (2015). Total Quality Management & Service quality perception and customer satisfaction in Islamic banks of Pakistan: the modified SERVQUAL model. Total Quality Management & Business Excellence, 1–19. https://doi.org/10.1080/14783363.2015.1100517
Ali, N. A. M., & Kasim, N. (2019). Talent Management for Shariah Auditors : Case Study Evidence From the Practitioners. International Journal of Financial Research, 10(3), 252–266. https://doi.org/10.5430/ijfr.v10n3p252
Ali, N. A. M., Shahimi, Z. M. M. S., & Shafii, Z. (2014). Competency of Shariah Auditors in Malaysia : Issues and Challenges. In 2nd Asean International Conference on Islamic Finance (pp. 1–10). Yogjakarta, Indonesia.
Amin, H. (2019). Understanding Consumer Receptiveness of Mortgage-Based Islamic Social Finance Using a Maqasid Framework : A Preliminary Study. International Journal of Islamic Economics and Finance, 1(2), 47–72.
Amin, H., Abdul-Rahman, A. R., & Razak, D. A. (2014). Theory of Islamic consumer behaviour: An empirical study of consumer behaviour of Islamic mortgage in Malaysia. Journal of Islamic Marketing, 5(2), 273–301. https://doi.org/10.1108/JIMA-06-2013-0042
Arumsari, F., Wiranatakusuma, D. B., & Ahmad, A. U. F. (2018). Building The Index Of Resilience For Islamic Banking In Indonesia: A Preliminary Research. International Journal of Islamic Economics and Finance, 1(1), 77–108.
Aysan, A. F., Disli, M., Ng, A., & Ozturk, H. (2016). Is small the new big ? Islamic banking for SMEs in Turkey. Economic Modelling, 54, 187–194. https://doi.org/10.1016/j.econmod.2015.12.031
Beck, T., Demirgüç-kunt, A., & Merrouche, O. (2013). Islamic vs . conventional banking : Business model , efficiency and stability. Journal of Banking and Finance, 37(2), 433–447. https://doi.org/10.1016/j.jbankfin.2012.09.016
Biancone, P. Pietro, & Radwan, M. (2016). European Companies: Evaluation For Sharia Compliance “Opportunities And Challenges.” European Journal of Islamic Finance, 5, 1–8. https://doi.org/10.13135/2421-2172/1803
Biancone, P. Pietro, & Radwan, M. (2018). Social Finance And Unconventional Financing Alternatives: An Overview. European Journal of Islamic Finance, 10, 1–6. https://doi.org/10.13135/2421-2172/2818
Biancone, P. Pietro, & Secinaro, S. (2016). The equity crowdfunding italy: a model sharia compliant. European Journal of Islamic Finance, 5, 1–10. https://doi.org/10.13135/2421-2172/1797
Bilal, M., & Meera, A. K. M. (2015). Al-Muqassah model credit card model for Islamic financial institutions in Malaysia. International Journal of Islamic and Middle Eastern Finance and Management, 8(4), 418–438. https://doi.org/10.1108/IMEFM-06-2014-0052
Bitar, M., Hassan, M. K., & Walker, T. (2017). Political systems and the financial soundness of Islamic banks ଝ. Journal of Financial Stability, 31, 18–44. https://doi.org/10.1016/j.jfs.2017.06.002
Chong, B. S., & Liu, M. (2009). Islamic banking : Interest-free or interest-based ? ☆. Pacific-Basin Finance Journal, 17(1), 125–144. https://doi.org/10.1016/j.pacfin.2007.12.003
Chowdhury, M. A. M., & Razak, D. B. A. (2019). Dynamism and Mechanism of Digital Currency (Cryptocurrency) towards Islamic Finance. European Journal of Islamic Finance (EJIF), (14), 1–9. https://doi.org/10.13135/2421-2172/3736
Doumpos, M., Hasan, I., & Pasiouras, F. (2017). Bank overall financial strength : Islamic versus conventional banks. Economic Modelling, XXX(XXXX), 1–11. https://doi.org/10.1016/j.econmod.2017.03.026
Ebrahim, M. S., Jaafar, A., Omar, F. A., & Salleh, M. O. (2016). Can Islamic injunctions indemnify the structural fl aws of securitized debt ? Journal of Corporate Finance, 1–16. https://doi.org/10.1016/j.jcorpfin.2016.01.002
Fa-yusuf, H. S., & Ndiaye, N. D. (2017). Issues with the Use of Tawarruq in Malaysia. Journal of Islamic Banking and Finance, 5(2), 30–36. https://doi.org/10.15640/jibf.v5n2a5
Hermanto, B. (2018). The Role of DSN-MUI to Ensure Shariah Compliance of Islamic Financial Transactions in Indonesia ( A Political Ambiguity Perspective ). Journal of Islamic Banking and Finance, 6(1), 37–44. https://doi.org/10.15640/jibf.v6n1a4
Ibrahim, M. H., & Shah, M. E. (2012). Bank lending , macroeconomic conditions and financial uncertainty : Evidence from Malaysia. Review OfDevelopment Finance, 2, 156–164. https://doi.org/10.1016/j.rdf.2012.09.001
Ito, T. (2013). Islamic rates of return and conventional interest rates in the Malaysian deposit market. International Journal of Islamic and Middle Eastern Finance and Management, 6(4), 290–303. https://doi.org/10.1108/IMEFM-11-2012-0113
Kahf, M. (2005). Basel II : Implications for Islamic Banking. In 6th International Conference on Islamic Economics and Banking (pp. 20–21). Jakarta.
Kamil, B. A. M., & Iqbal, F. I. (2017). Develop and Engage Talents : A Preliminary Study at Islamic Banks in Northern Region of Malaysia. Journal of Accounting and Finance in Emerging Economies, 3(2), 113–122.
Kasim, N., Sanusi, Z. M., Mutamimah, T., & Handoyo, S. (2013). Assessing the current practice of Auditing in Islamic Financial Institutions in Malaysia and Indonesia. International Journal of Trade, Economics and Finance, 4(6), 414–418. https://doi.org/10.7763/IJTEF.2013.V4.328
Khaliq, A., & Thaker, H. M. T. (2014). Dynamic causal relationship between Islamic banking and economic growth: Malaysian evidence. European Journal of Islamic Finance, 8, 1–11.
Khan, F. (2010). How ‘ Islamic ’ is Islamic Banking ? Journal of Economic Behavior & Organization, 76, 805–820. https://doi.org/10.1016/j.jebo.2010.09.015
Khan, M. M. (2016). Csr Standards and Islamic Banknig Practice: a Case of Meezan Bank of Pakistan. The Journal of Developing Areas, 50(5), 295–306. https://doi.org/10.1353/jda.2016.0046
Kitamura, H. (2019). Who pioneered Islamic banking in Malaysia? The background of the pioneers of Bank Islam Malaysia Berhad. Contemporary Islam, 14(1), 75–93. https://doi.org/10.1007/s11562-019-00443-w
Kunhibava, S. (2012). Islamic Banking in Malaysia. International Journal of Legal Information Spring, 40(January 2012), 1–10. https://doi.org/10.1017/S0731126500006478
Kunhibava, S., Linga, S. T. Y., & Ruslan, M. K. (2018). Sustainable Financing and Enhancing the Role of Islamic Banks in Malaysia. Arab Law Quarterly, 32, 129–157. https://doi.org/10.1163/15730255-12322023
Kuran, T. (2004). Islam and Mammon: The Economic Predicaments of Islamism. New Jersey: Princeton University Press.
Lee, B., Collier, P. M., & Cullen, J. (2007). Reflections on the use of case studies in the accounting , management and organizational disciplines. Qualitative Research in Organizations and Management, 2(3), 169–178. https://doi.org/10.1108/17465640710835337
Li, B., Ee, M. S., Boo, Y. L., & Rashid, M. (2016). Islamic or conventional mutual funds: Who has the upper hand? Evidence from Malaysia. Pacific-Basin Finance Journal, 1–14. https://doi.org/10.1016/j.pacfin.2016.01.004
Lo, C. W., & Leow, C. S. (2014). Islamic Banking in Malaysia : A Sustainable Growth of the Consumer Market. International Journal of Trade, Economics and Finance, 5(6), 526–529. https://doi.org/10.7763/IJTEF.2014.V5.427
Lone, F. A., & Ahmad, S. (2017). Islamic finance : more expectations and less disappointment. Investment Management and Financial Innovations, 14(134–141). https://doi.org/10.21511/imfi.14(1).2017.14
Louhichi, A., Louati, S., & Boujelbene, Y. (2019). The Regulations–Risk Taking Nexus under Competitive Pressure: What about the Islamic Banking System? Research in International Business and Finance, 18. https://doi.org/10.1016/j.ribaf.2019.101074
Mahmood, S. A. I. (2010). Public procurement and corruption in Bangladesh confronting the challenges and opportunities. Journal of Public Administration and Policy Research, 2(6), 103–111.
Majid, A. A., Samsudin, M. A., Laton, M. Z., & Aziz, N. N. A. (2016). Islamic Finances Growth in Malaysia : The Challenges. KONAKA, (July), 327–332.
Mallin, C., Farag, H., & Ow-yong, K. (2014). Corporate social responsibility and financial performance in Islamic banks. Journal of Economic Behavior and Organization, 103(March 2013), S21–S38. https://doi.org/10.1016/j.jebo.2014.03.001
Mohamed, H. (2019). Investigating Fairness in Economic Transactions : Evidence in Belief Systems *. International Journal of Islamic Economics and Finance, 1(2), 123–144. https://doi.org/10.18196/ijief.127
Mushtaq, S., & Siddiqui, D. A. (2017). Effect of interest rate on bank deposits : Evidences from Islamic and non-Islamic economies. Future Business Journal, 3(1), 1–8. https://doi.org/10.1016/j.fbj.2017.01.002
Mustafa, O. A. O. (2019). Assessment of the Financial Performance of Islamic Commercial Banks in Sudan under Credit Risk and Inflation Pressures ( 1995-2017 ). Journal of Islamic Banking and Finance, 7(1), 14–26. https://doi.org/10.15640/jibf.v7n1a2
Naqvi, B., Rizvi, S. K. A., Uqaili, H. A., & Chaudhry, S. M. (2017). What enables Islamic banks to contribute in global financial reintermediation? Pacific-Basin Finance Journal, 1–21. https://doi.org/10.1016/j.pacfin.2017.12.001
Narayan, P. K., Rizvi, S. A. R., Sakti, A., & Syarifuddin, F. (2019). Role of Islamic banks in Indonesian banking industry: an empirical exploration Paresh. Pacific-Basin Finance Journal, 2–14. https://doi.org/10.1016/j.pacfin.2019.02.002
Odeduntan, A. K., & Adewale, A. A. (2013). Financial Stability of Islamic Banks: A Review of the Literature. European Journal of Islamic Finance, 2, 1–9.
Pikri, E. (2018, February 1). Is Cryptocurrency Haram? The Chairmain Of BNM’s Shariah Advisory Council Says No. Vulcan Post. Retrieved from https://vulcanpost.com/632153/haram-cryptocurrency-syariah-advisory-council/
Rahman, S. (2019). A Comparative Study of Stability & Consumer Confidence between Islamic & Conventional Banks in Bangladesh. European Journal of Islamic Finance, 13, 1–9.
Rhanoui, S., & Belkhoutout, K. (2017). Islamic Banking in Morocco : The Factors of a Promising Future. Journal of Islamic Banking and Finance, 5(1), 7–14. https://doi.org/10.15640/jibf.v5n1a2
Rhanoui, S., & Belkhoutout, K. (2019). Risks Faced by Islamic Banks : A Study on the Compliance Between Theory and Practice. International Journal of Financial Research, 10(2), 137–146. https://doi.org/10.5430/ijfr.v10n2p137
Samad, A. (2019). Determinants of Efficiency of the Islamic Banks of Bangladesh during 2008-2012. Journal of Islamic Banking and Finance, 7(1), 1–13. https://doi.org/10.15640/jibf.v7n1a1
Sanyinna, A. Y., & Omar, H. H. (2017). Frontiers and Mechanics of Risk Management in Islamic Banking System - Policy Measures for Effective Risk Mitigation. Journal of Islamic Banking and Finance, 5(1), 26–35. https://doi.org/10.15640/jibf.v5n1a4
Sarif, S. M. (2014). Tawhidic paradigm and organizational policy and strategy practices. South East Asia Journal of Contemporary Business, Economics and Law, 5(2), 28–35.
Saunders, M., Lewis, P., & Thornhill, A. (2007). Research Methods for Business Students (4th ed.). Essex: Pearson Education Limited.
Shabbir, M. S., & Rehman, A. (2019). Layers of misconceptions about Islamic banking Are Islamic banks threats , challenges and opportunities for investors? Journal of Islamic Marketing, 2–20. https://doi.org/10.1108/JIMA-02-2018-0026
Sukmana, R., & Ibrahim, M. H. (2017). How Islamic are Islamic banks ? A non-linear assessment of Islamic rate – conventional rate relations. Economic Modelling, 1–6. https://doi.org/10.1016/j.econmod.2017.02.025
Supardin. (2020). The Challenges of Islamic Economic Law in the Industrial Revolution. Jurisdictie, 11(1), 125–138. https://doi.org/10.18860/j.v11i1.8875
Timur Kuran. (2012). The long divergence: How Islamic law held back the Middle East. New Jersey: Princeton University Press.
Waemustafa, W. (2013). The Emergence Of Islamic Banking: Development , Trends , and Challenges. IOSR Journal of Business and Management, 7(2), 67–71.
Yaacob, H., & Donglah, N. K. (2012). Shari’ah Audit in Islamic Financial Institutions : The Postgraduates ’Perspective. International Journal of Economics and Finance, 4(12), 224–239. https://doi.org/10.5539/ijef.v4n12p224
Downloads
Published
How to Cite
Issue
Section
License
EJIF content is licensed under a Creative Commons Attribution 4.0 International License.
Authors keep the copyrights for their work and give the journal the work's first publication copyright, which is at the same time licensed under a Creative Commons License – Attribution, which in turn allows other parties to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
EJIF has been approved for inclusion in 
EJIF has been approved for inclusion in 
EJIF is a member of 
EJIF is indexed by 
EJIF is listed in the ANVUR (Italian National Agency for the Evaluation of Universities and Research Institutes) as a scientific journal in both 
