DOI: https://doi.org/10.14710/dilrev.7.1.2022.88-105

BETWEEN LEGAL RISK AND SHARIA RISK IN ISLAMIC BANKING: HOW SHARIAH GOVERNANCE ADDRESS THE PROBLEM

*Iffah Karimah  -  Faculty of Law, Universitas Indonesia, Indonesia
Open Access Copyright (c) 2022 Diponegoro Law Review under http://creativecommons.org/licenses/by-nc-sa/4.0.

Citation Format:
Abstract

Islamic Bank has unique risk due to its Sharia-compliance principles. Two of risksknown in Islamic Banking are legal risk and sharia risk. This paper aims to explain the legal risk and sharia risk faced by Islamic Banking in Indonesia. Moreover, this paper also will discuss the cause of these risks and its mitigation strategy using Shariah Governance concept. This paper using literature studies from previous research and existing regulation in Indonesia. This research shows that Islamic Banking in Indonesia has unique legal risks and sharia risk due to its adherence to a dual law system: shariah law and national law. There are several causes of legal risk and sharia risk in Islamic Banking in Indonesia, such as lack of supporting legal system and regulation, lack of standardization contract in Islamic Banking, and lack of Court Systems to resolve Islamic Banking’sproblem. Moreover, there are severalissues on the product development process in Islamic Bank. In addition, this paper explores the role of Shariah Governance such as Sharia Supervisory Body and National Shariah Board as a solution to address the problem stemming from legal risk and sharia risk.

Fulltext View|Download
Keywords: Risk Management; Legal Risk; Sharia Risk

Article Metrics:

Article Info
Section: Articles
Language : EN
Recent articles
THE LEGAL POLICY OF CITIZENSHIP IN FULFILLING THE RIGHTS OF STATELESS PERSONS AS AN EFFORT TO FULFILL HUMAN RIGHTS IN INDONESIA JURIDICAL ANALYSIS OF LOCAL GOVERNMENT AUTHORITY ON THE ESTABLISHMENT LOCAL REGULATIONS ECO-TOURISM DEVELOPMENT NON-REFOULMENT PRINCIPLE AND PROHIBITION OF ENTRY FOR REFUGEES DUE TO THE COVID-19 PANDEMIC More recent articles
Most cited articles
LEGAL PERSPECTIVE ON ASEAN ECONOMIC COMMUNITY IMPLEMENTATION OF LEGAL PROTECTION BY THE GOVERNMENT IN ORDER TO EMPOWERMENT OF MICRO SMALL MEDIUM ENTERPRISE TO REALIZE THE JUSTICE ECONOMY (Research Study: The Office of Cooperative and Micro Small and Medium Enterprise Province of Central Java) MANAGEMENT, DISTRIBUTION, AND REDEMPTION OF VILLAGE FUND Index Index More cited articles
  1. Abdullah, Marliana, Shahida Shahimi, and Abdul Ghafar Ismail. “Operational Risk in Islamic Banks: Examination of Issues.” Qualitative Research in Financial Markets 3, no. 2 (2011): 131–151
  2. Ahmed, H. “Risk Management Assessment Systems: An Application to IBs.” Islamic Economic Studies 19, no. 1 (2011): 63–68
  3. Ahmed, H Abib A. “Risk Management Assessment Systems: An Application To Islamic Banks.” Islamic Economic Studies 19, no. 1 (2011): 63–86
  4. Ahmed, Habib. “Islamic Banking and Shari’ah Compliance : A Product Development Perspective.” Journal of Islamic Finance 3, no. 2 (2014): 15–29
  5. ———. “Islamic Finance at a Crossroads : The Dominance of the Asset-Based Sukuk.” Butterworth’s journal of international banking and financial law 25, no. 6 (2010): 366–367
  6. ———. “Islamic Law, Adaptability And Financial Development.” Islamic Economic Studies 13, no. 2 (2006): 5
  7. ———. “Shari’ah Governance Regimes for Islamic Finance: Types and Appraisal - I Regimi Di Governance Conformi Alla Shari’ah Nella Finanza Islamica: Tipologia e Valutazione.” Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova 64, no. 4 (2011): 393–412
  8. ———. “The Islamization of Economies and Knowledge: A New Institutional Economics Perspective.” American Journal of Islamic Social Sciences 29, no. 4 (2012): 22–45
  9. Balz, K. Sharia Risk. How Islamic Finance Has Transformed Islamic Contract Law., 2008
  10. Barlinti, Yeni Salma, and Yetty Komalasari Dewi. “Should National Shariah Board Be Restructured to Sustain the Development Economic Shariah in Indonesia.” Indonesian Journal International Law 9, no. 4 (2012): 583–596
  11. Basel Committee On Banking Supervision. Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems December 2010 (Rev June 2011). Bcbs 189. Vol. 2010, 2011. http://www.bis.org/publ/bcbs189.pdf
  12. Bushman, Robert M. and Regina Wittenberg-Moerman. “The Role of Bank Reputation in ‘Certifying’ Future Performance Implications of Borrowers’ Accounting Numbers.” Journal of Accounting Research 50, no. 4 (2012): 883–930
  13. Chapra, M. U. and H. Ahmed. “Corporate Governance in IFIs Islamic Development Bank.” Islamic Research and Training Institute 6 (2002)
  14. Cumming, Christine and Beverly Hirtle. “The Challenges of Risk Management in Diversified Financial Companies.” Economic Policy Review 7, no. 1 (2001). https://ssrn.com/abstract=844215
  15. Djojosugito, Reza. “Mitigating Legal Risk in Islamic Banking Operations.” Humanomics 2 (2008): 110–121
  16. Djojosugito, Reza Adirahman. “Relative Suitability of Civil and Common Law Regimes for Islamic Banking.” Islamic Financial Architecture (2003): 549
  17. El-Hawary, Dahlia, Wafik Grais, and Zamir Iqbal. “Diversity in the Regulation of Islamic Financial Institutions.” Quarterly Review of Economics and Finance 46, no. 5 (2007): 778–800
  18. Ginena, Karim. Sharī ‘ah Risk and Corporate Governance of Islamic Banks. Corporate Governance, 2014
  19. Van Greuning, Hennie and Zamir Iqbal. Risk Analysis for Islamic Banks. Washington DC: The World Bank, 2007
  20. Harahab, Yulkarnain. “Kesiapan Pengadilan Agama Pekalongan Dalam Menyelesaikan Sengketa Ekonomi Syariah.” Mimbar Hukum 20, no. 1 (2008): 111–122
  21. Hussain, Amanat. Managing Operational Risk in Financial Markets. Oxford: Butterworth-Heinemann, 2000
  22. Hutchinson, Terry and Nigel Duncan. “Defining and Describing What We Do: Doctrinal Legal Research.” Deakin L. Rev. 17 (2012): 83
  23. IFSB. Guiding Principles of Risk Management for Institutions (Other than Insurance Institutions) Offering Only Islamic Financial Services. IFSB, 2005
  24. Khan, Tariqullah and Habib Ahmed. Risk Management: An Analysis of Issues in Islamic Financial Industry Occasional Papers 91, The Islamic Research and Teaching Institute (IRTI), 2001. http://www.irti.org/English/Pages/Publications.aspx
  25. Leippold, Markus, and Paolo Vanini. “The Quantification of Operational Risk.” Journal of Risk 8, no. 01 (2005): 59–85
  26. Nur, Hidayati Maslihati. “Dewan Pengawas Syariah Dalam Sistem Hukum Perbankan : Studi Tentang Pengawasan Bank Berlandaskan Pada Prinsip - Prinsip Islam.” Lex Jurnalica 6, no. 1 (2008): 1–15
  27. Rama, Ali. “Analisis Kerangka Regulasi Model Syariah Governance Lembaga Keuangan Syariah Di Indonesia.” Journal of Islamic Economics Lariba 1, no. 1 (2015): 1–15
  28. Rammal, Hussain G. “The Importance of Shari’ah Supervision in Islamic Financial Institutions.” Corporate Ownership and Control 3, no. 3 B (2006): 204–208
  29. Setyowati, Ro’fah ; Lastuti Abubakar and Nunung Rodliah. “Islamic Banking: Spiritual Rights Perspective On Consumer Protection In Indonesia Diponegoro Law Review.” Diponegoro Law Review 02, no. 1 (2017): 1
  30. Sood, Muhammad. “Regulation and Supervision of Sharia Banking According To Indonesian Legislation.” Unram Law Review 1, no. 1 (2017): 16–40
  31. Triandaru, Sigit dan Totok Budisantoso. Bank Dan Lembaga Keuangan Lain. Jakarta: Penerbit Salemba Empat, 2006
  32. Wibisono, Yusuf. “Politik Ekonomi UU Perbankan Syariah Peluang Dan Tantangan Regulasi Industri Perbankan Syariah.” Bisnis & Birokrasi, Jurnal Ilmu Administrasidan Organisasi 16, no. 2 (2009): 105–115

Last update:

No citation recorded.

Last update: 2024-11-06 02:25:51

No citation recorded.