Islamic Finance Practice: Expanding Beyond Shariah Compliance – Challenges and Opportunities

Intan A’thirah Binti Mohd A’kashalf, Nur ‘Izzati Athirah Binti Mohamad Rosli, Nur Arina Nadiyah Binti Yusri, Tuan Nurizzul Najian Binti Tuan Ismail, Wan Nur Fathiah Nabihah Binti Wan Razali and Salsabila Binti Abd Rahim
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Intan A’thirah Binti Mohd A’kashalf: Student, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor
Nur ‘Izzati Athirah Binti Mohamad Rosli: Student, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor
Nur Arina Nadiyah Binti Yusri: Student, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor
Tuan Nurizzul Najian Binti Tuan Ismail: Student, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor
Wan Nur Fathiah Nabihah Binti Wan Razali: Student, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam, Selangor
Salsabila Binti Abd Rahim: Senior Lecturer, Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam Selangor

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 10, 2522-2530

Abstract: The Islamic financial services industry (IFSI) reached a global valuation of 3.69 trillion by 2024. Despite this growth, the industry currently accounts for less than 1% of global financial assets. As the sector evolves, there is an urgent need to transcend mere Shariah compliance and focus on delivering genuine value to customers and society. This paper proposes a forward-looking framework that emphasizes the principles of Maqasid al-Shariah (the higher objectives of Islamic law) rather than solely adhering to traditional compliance. The framework is built on three foundational pillars: (1) value-based intermediation, which aligns financial activities with the real economy and fosters sustainable development; (2) ethical governance, which ensures that decision-making is rooted in Islamic ethical standards; and (3) social impact, which evaluates and reports on the industry’s contributions to social and environmental well-being. By embracing this framework, Islamic financial institutions can distinguish themselves from conventional finance, cultivate trust among customers, and promote a more just and equitable economic system. The paper then discuss the challenges and opportunities related to the implementation of this framework and advocates for a collaborative approach among industry stakeholders to facilitate the transformation of Islamic finance. Additionally, it explores the potential for innovative financial solutions that not only comply with Islamic principles but also address broader ethical, social, and environmental issues, thereby identifying new avenues for Islamic finance to support sustainable development and ethical investing.

Date: 2024
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