Overview of Islamic Financial
Regulatory Paradigm in Malaysia
Prof. Dr. Mohd. Ma’sum Billah
www.drmasumbillah.blogspot.com
Bank Negara Malaysia
Issues to be Highlighted
 PREVIEW
 ISSUES
REQUIRED TO BE
ADDRESSED:

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Recent Development of Islamic Regulatory
Frameworks: On Banking, Finance,
Takaful, Financial Planning, Capital
Market, Wealth & Property Management,
Business, Commerce, E-Commerce, and IT.
Effects of the Absence of the Regulatory
Frameworks.
The Way Forward: Possible
Recommendations
Recent Development of Islamic
Regulatory Frameworks Globally
 Global
Islamic Economic
Environment:
Middle East
 Other Muslim World
 Non-Muslim World

Recent Development of Islamic
Regulatory Frameworks in Malaysia

BANKING:
Islamic Banking Act 1983 (Amendment
2003), section 13A (1) “Advice of
Syariah Advisory Council”, (Islamic
Bank may seek advice from the SAC and
is binding to apply).

BAFIA: Amendment 2003, section 124
(7)(a) Syariah Advisory Council means,
the SAC established under the Central
Bank of Malaysia Act 1958.
Cont.
 BANK
NEGARA MALAYSIA ACT
1958 (Amendment 2003),
 section 16 (B)(1) The SAC shall
have the authority to ascertain
the total Syariah compliance of
all matters relating to Islamic
banking and finance.

Section 16 (B)(2) Appointment of the
SAC subject to their qualification
with their appropriate knowledge on
Syariah, banking, finance, law and
Cont.

Section 16 (B)(3): Judges may also be
appointed in the SAC.

Section 16 (B)(4): SAC’s Functions.

Section 16 (B)(5): SAC’s
Remuneration.

Section 16 (B)(6): SAC Limitation to
be a member in more than one
institution.
Section 16 (B)(7): The BNM has the
right to consult the SAC.

Cont.

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Section 16 (B)(8): SAC opinion is
admissible in any legal proceedings.
Section 16 (B)(9): SAC’s ruling is
binding on the legal proceedings.
Section 16 (B)(10): Establishment of
secretariat for the SAC.
Section 16 (B)(11): Request for
consultation from the SAC shall be
through the secretariat.
Section 16 (B)(12): Interpretations.
Cont....

ARBITRATION:

Section 16 B (8) of the Bank Negara Malaysia Act
1958 (Amendment 2003) provides that:
“Where any proceedings relating to Islamic Banking
business, Takaful, Islamic finance or any other
business based on Shari’ah and is supervised and
regulated by the Bank before any court or
ARBITRATOR any question arises concerning a
Shari’ah matter, the court or the ARBITRATOR,
as the case may be, may:
(a)
(b)
Take into consideration any written directives
issued by the Bank ........or
Refer such question to the SAC for its Rulings.
Cont.

TAKAFUL ACT 1984 (Amendment 2003),

section 53A (1) “Advice of Syariah Advisory
Council to Takaful operator, agent, broker,
or adjuster.

ISLAMIC CAPITAL MARKET:
Resolutions of the Securities Commission
Syariah Advisory Council 2002
 SAC of the SC
 Research methodologies in the ICM
 Principles of Al-Mu’amalat in the ICM
Cont.

Capital Market Products According to
Islamic Jurisprudence
Capital Market issues According to Islamic
Jurisprudence
Syariah Criteria for Listed Securities
Islamic Financial Services Board Act 2002

TABUNG HAJI ACT 1995

Establishment, officers and agents, finance,
pilgrim organizer, pilgrims and
miscellaneous.


Cont.

AAOIFI:

Financial Accounting Number 13
Financial Accounting Number 14
Auditing Standard for Islamic
Financial Institution Number 4
Statement of Financial Accounting
Financial Accounting Standards
Code of Ethics for Accountants and
Auditors of Islamic Financial
Institutions
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Effects of the Absence of the
Regulatory Frameworks.
 Inefficiency.
 Unhealthy
Competition.
 No Confidence.
 Hampering the Progress.
The Way Forward:
Possible
Recommendations

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Possible Efforts to Establish the
Necessary Regulatory Framework
The following are needed to meet
the contemporary demand:
Future (Upgrading) Of --Islamic Banking Act 1983
Takăful Act 1984
BAFIA (amendment) 1996 (S.66)
Cont.
Possibilities & Prospects
(Bills)Of-- Islamic Negotiable / Monetary Instruments
Bill
 Islamic Companies Bill
 Islamic Leasing (‫ )االجارة‬Bill
 Islamic Unit Trust Bill
 Islamic Pawnshop (‫( الرهن‬Bill
 Islamic BAFIA

Cont.
Islamic Contract )‫ (العقد‬Bill
 Islamic Revenue (‫( الزكواة والعشر‬Bill
 Islamic Bond @ Sukuk Bill
 Islamic Wealth Management Bill
 Islamic Financial Planning Bill
 Islamic Hire-Purchase Bill
 Islamic Sale of Goods Bill
 Islamic Money Laundering Bill

Cont.
Possibilities & Prospects
(Standards) Of-- Islamic Accounting Standard (MASB)
 Islamic Auditing Standard
 Islamic Partnership (‫ )المشاركة‬Standard
 Islamic Commercial Arbitration
(‫(التحكيم‬Standard

Thank You
Wa’ssalam