The Study of Potential Shariah Non-Compliance Risks in Murabahah Along with Their Risk Management

Farooq Hassan Muhammad Yunas Ali ()
Additional contact information
Farooq Hassan Muhammad Yunas Ali: University of Karachi

Journal of Finance and Economics Research, 2019, vol. 4, issue 1, 44-58

Abstract: The primary objective of this paper is to find out the Shariah Non-Compliance Risks (SNCRs) of Murabahah along with proposing its risk management system. As the activity of Shariah non-compliance is negligence or failure to comply with the Shariah rules and regulations as well as for some extent the breach of the law of the land. Hence, Identification, Monitoring, Control and Mitigation of SNCRs need to be undertaken sensitively otherwise the spirit and objective of Islamic banks (IBIs) will be no more different than conventional banking system. Moreover, failure in control and mitigation of Shariah non-compliance risks may render the transaction into 'Null and Void' or 'Voidable' therefore, the return/profit is considered impermissible. In addition, it may expose the status of IBIs at high risk regarding their reputation, profitability and confidence of their stakeholders which may lead the Institution towards collapse and downfall. Keeping in view, the need of SNCR management, this paper is established to support the industry for development of their own SNCR management system so that the targeted outcomes of Islamic banking on the basis of Shariah principles i.e. Shariah compliance, permitted profits and sound reputation can easily be achieved.

Keywords: Murabahah; SNCR; prohibited profit; voidable; null and void. (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations:

Downloads: (external link)
http://geistscience.com/JFER/Issue1-19/Article4/JFER1904104.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gei:jnlfer:v:4:y:2019:i:1:p:44-58

Access Statistics for this article

Journal of Finance and Economics Research is currently edited by Imtiaz ARIF and Syed Ali Raza

More articles in Journal of Finance and Economics Research from Geist Science, Iqra University, Faculty of Business Administration
Bibliographic data for series maintained by Imtiaz ARIF ().