SCHOOL OF BUSINESS AND SOCIAL SCIENCES

BBF3013 ISLAMIC FINANCIAL SYSTEM

GROUP ASSIGNMENT – ISLAMIC BANKING

PREPARED BY:

NAME STUDENT ID
ANDI NUR ELISYA SYAHIRA BINTI BAHRI AIU18092007
SITI NORALINNNAH BINTI JUSNEH AIU18092008
PUSPA AZWIEYANIE BINTI JAWI AIU18092005
MAIDAH BINTI SALI AIU18092001

PREPARED FOR:

LECTURE DR. SHAHRIZA OSMAN

SUBMISSION DATE:

09 NOVEMBER 2020

(MONDAY)
Based on legal frameworks and Syariah principles, would you agree that the possibility
of standardization or harmonization of all Islamic bank's products throughout the
world in its meanings and operations could happen in real life? Discuss

The possibility of standardization or harmonization of all Islamic banks'

products throughout the world in its meanings and operations could happen in real life
because the standardization or coordination of all Islamic banking products worldwide is
unrealistic and cannot fully implement. To ensure that the coordination of Islamic banking
products is done, the Islamic banking process needs to be scrutinized based on the
interpretation of Fiqh and Fatwas. For example, Maybank, based in Malaysia, runs the same
Islamic banking system as Dubai Islamic. The system cannot be changed from banks to add
other business services that do not conflict with Sharia principles.

Moreover, the Accounting and Auditing Organization for Islamic Financial

Institutions (AAOIFI) is an institution responsible for research to standardize all Islamic
banking products through the interpretation of Shariah principles. They state that the
standardization of all Islamic banking products is possible because conventional banks also
seem to be used in almost all countries. However, it can be a standard argument, including
rules for guarantees, surrender (hawala), contract terms such as those related to ownership
(Qabd), and prohibition (Gharar).

Islamic Financial Law is a hybrid legal transplant, which, with the modification of
municipal law, can be transplanted worldwide in jurisdictions seeking to facilitate Islamic
finance. However, legal and regulatory reforms need to be done because Islamic finance's
legal aspects are different from conventional finance. IFL is a combination of standard inputs,
including shariah commercial principles, English law, international financial services law,
and modern Islamic financial standards, as set by the Accounting and Auditing Organization
of Islamic Financial Institutions. The specific composition of IFL differs according to the
municipal legal system, which has chosen to simplify and regulate the Islamic financial
industry.
 Besides, on the liability line, the use of principal-guaranteed in deposit-taking,
Shariah contracts such as Qard, Qadi'ah, and Tawarruq are differentiated from big unsecured
Shariah investment contracts such as Mudarabah and Wakalah. Similarly, on the asset side,
the spectrum of financing operations draws on Islamic contracts' distinctive. The
characteristics include equity and partnership financing contracts such as Musharakah,
Mutanaqisah, lease-based financing contracts such as Ijarah, Muntahia, and fee-based
activities under the contracts Wakalah.

It is essential to standardize or harmonize all Islamic banks' products because it can

collaborate for Islamic banks and conventional banks. It also ensures that operations such as
institutions are Shariah-compliant. Shariah governance also ensures that the industry is in
accord with the Shariah by the Islamic bank's legitimacy. Bank Islam is the first to be used in
Malaysia, which offers the same services as convention banks in Malaysia.

After that, it is based on the shariah principles that have been set to do standardization
or harmonization of all Islamic bank's products. Apart from that, it also provides subsidiaries
that conduct operations based on Syarikat Al-Ijarah Sdn Bhd's shariah principles, which leads
to the leasing of fixed assets. The Syarikat Nominees Sdn Bhd provides nominee services,
and Syarikat Takaful Malaysia sdn Bhd provides general protection and family business. But
at the same time, BNM has a long-term objective to create an Islamic banking system in line
with the conventional banking system.

Finally, the benefits of standardization are those of the stability of services and
industry efficiencies. However, without it, the Islamic banks will struggle to develop volumes
like its conventional counterparty. The main pre-requisite for the industry is to develop
further and increase its market share in an Islamic bank. The standardization of the practices
across the globe may bring about the Islamic financial industry's further growth and strength.