Compliance with Shariah requirement is a prerequisite in ensuring the legitimacy and integrity 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 promote transparency and consistency of Shariah contract application which would enhance the contracts’ certainty and strengthen Shariah compliance by IFIs.
The Shariah contract-based regulatory policy consists of two components, namely the Shariah and the operational requirements, where the Shariah requirements highlight the salient features and essential conditions of a specific contract, while the latter outlines the core principles underpinning good governance and oversight, proper product structuring, effective risk management, sound financial disclosure and fair business and market conduct, and the operational requirements aim to complement and promote sound application of the Shariah principle.
Musyarakah is a partnership between two or more parties, whereby all contracting parties contribute capital to the musyarakah venture and share the profit and loss from the partnership.
This policy document aims to:
(a) provide reference on the Shariah rulings associated with musyarakah;
(b) set out key operational requirements with regard to the implementation of musyarakah; and
(c) promote end-to-end compliance with Shariah requirements, which include adherence to sound banking practices and safeguarding customers’ interests.
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
