Compliance with Shariah requirements is a prerequisite in ensuring the legitimacy of Islamic financial products and services. In meeting this expectation, it is essential for an Islamic financial institution (IFI) to establish the necessary operational framework and infrastructure to ensure that the conduct of Islamic financial transactions is consistent with Shariah.
The Shariah contract-based regulatory policy is intended to ensure end-to-end compliance with Shariah and therefore, enhance the integrity and sustainability of the IFI.
The policy document contains two distinctive parts, namely the Shariah requirements and the operational requirements. The former highlights the salient features and essential conditions of istisna contract. The latter outlines the operational requirements, which consist of core principles of good governance and oversight, robust documentation, effective risk management, transparent disclosure to customers, and fair business and market conduct. These operational requirements are aimed at complementing and promoting sound application of the Shariah principles. This policy document will be applicable to all products and services that are structured based on istisna contract. For the avoidance of doubt, the requirements set out in this policy document must be observed by an IFI who acts as a seller or purchaser.
This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking
