Shariʿah scrutiny of Islamic banks' financial compensation fund in Bangladesh : governance principles in the COVID-19 perspective

Joint Authors

Masum, Abd Allah
Sharif al-Islam, S. M.

Source

Islamic Economic Studies

Issue

Vol. 29, Issue 2 (30 Jun. 2022), pp.139-158, 20 p.

Publisher

Islamic Development Bank (IDB) Islamic Research and Training Institute (IRTI)

Publication Date

2022-06-30

Country of Publication

Saudi Arabia

No. of Pages

20

Main Subjects

Financial and Accounting Sciences

Abstract EN

Purpose-The purpose of this study is to critically analyze the Financial Compensation Funds being accumulated by Islamic Banks of Bangladesh in credit-based transactions.

In this connection, due to the evolved liquidity crisis amidst the COVID-19, industry opinions are observed that suggest including the compensations or the donation funds directly into the bank's income account.

But the Sharīʿah does not permit it.

Such alternative proposals of using compensation or donation fund during crises are scrutinized under Sharīʿah principles to come to a logical conclusion.

Design/methodology/approach-The approach followed in the study is textual and discourse analysis through descriptions of ideal Sharīʿah-compliant methods for handling late payment of credit and comparison with the industry practices.

Findings-It is observed that there are conceptual gaps in the industry as is reflected in the Islamic Banking Guideline of Bangladesh.

The funds collected from the debtor due to late payment are named as compensation (Ta‘wīḍ) whereas the nature of the transaction is a donation (Tabarru').

The misconception can lead to various Sharīʿah non-compliant activities later with the funds.

The proposals brought out in the industry to use such compensation/donation funds during a crisis are a consequence of this.

The proposals of using such funds for banks' purposes in any situation are not supported by Sharīʿah principles and are against the Islamic banking philosophy.

Originality/value-The study is very relevant to the current crisis of COVID-19 in the domestic Islamic Banking Industry and also instrumental for the future guidance to stick to the Sharīʿah principles in managing compensation or donation funds by the Islamic Banks

American Psychological Association (APA)

Masum, Abd Allah& Sharif al-Islam, S. M.. 2022. Shariʿah scrutiny of Islamic banks' financial compensation fund in Bangladesh : governance principles in the COVID-19 perspective. Islamic Economic Studies،Vol. 29, no. 2, pp.139-158.
https://search.emarefa.net/detail/BIM-1414676

Modern Language Association (MLA)

Masum, Abd Allah& Sharif al-Islam, S. M.. Shariʿah scrutiny of Islamic banks' financial compensation fund in Bangladesh : governance principles in the COVID-19 perspective. Islamic Economic Studies Vol. 29, no. 2 (Jun. 2022), pp.139-158.
https://search.emarefa.net/detail/BIM-1414676

American Medical Association (AMA)

Masum, Abd Allah& Sharif al-Islam, S. M.. Shariʿah scrutiny of Islamic banks' financial compensation fund in Bangladesh : governance principles in the COVID-19 perspective. Islamic Economic Studies. 2022. Vol. 29, no. 2, pp.139-158.
https://search.emarefa.net/detail/BIM-1414676

Data Type

Journal Articles

Language

English

Notes

Includes bibliographical references : p. 156-157

Record ID

BIM-1414676