ISSUES AND CHALLENGES OF FINANCIAL MANAGEMENT PRACTICES IN ISLAMIC FINANCIAL INSTITUTIONS: EMPIRICAL EVIDENCE FROM BANGLADESH
Keywords:
Islamic Finance, Shariah Compliance, Bangladesh.
Abstract
Studies suggest several issues and challenges of financial management practices in Islamic banks and insurance companies and Islamic non-bank financial institutions (INBFIs) in Bangladesh. The purpose of the research is to examine the issues and challenges of Islamic Financial Management (IFM) from an empirical perspective. The study relies on a structured questionnaire survey in prominent Islamic financial institutions (IFIs) of Bangladesh for achieving its objective. After confirming data reliability based on Cronbach's alpha, the study proceeds to analyse by applying descriptive statistics and principal component factor analysis using correlation, Kaiser-Meyer-Olkin (KMO) and Bartlett's Test and VARIMAX Rotation. The study finds that there is no separate regulatory framework to supervise and monitor IFIs in Bangladesh rather the central bank regulates the Islamic financial system based on the existing laws and regulations of the conventional financial system. The findings of this study suggest that the government should establish a separate regulatory body for monitoring the IFI’s functions so that they can perform their activities smoothly in the congenial environment in Bangladesh.
JEL Classification Codes: G10, G21, G23.
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Pandey, I. M. & Ongpipattanakul, V. (2015). Agency behavior and corporate restructuring choices during performance decline in an emerging economy.” International Journal of Managerial Finance, 11(2), 244-267.
Rahman, A. M. (2018). Voluntary insurance for ensuring risk-free on-the-go banking services in market competition: A proposal for Bangladesh. Journal of Asian Finance, Economics and Business, 5(1), 17-27.
Rahman, A., Ahmad, W. M. W., & Buang, A. H. (2011). Can a takaful company reinsure with a reinsurance company?” African Journal of Business Management, 5(30), 11768-11778.
Saleh, M. M. (2016). Challenges in takaful application within conventional insurance framework in Nigeria: The imperative for legislative harmonization of regulatory instruments, Doctoral dissertation. Faculty of Law, University of Malaya, Malaysia.
Salman, A., & Nawaz, H. (2018). Islamic financial system and conventional banking: A comparison, Arab Economic and Business Journal, 13(2), 155-167.
Sarwar, M. J. (2016). Future Challenge in Islamic Insurance (Takaful) in Bangladesh”, Australian Journal of Sustainable Business and Society, 2(1), 69-80.
Sheheli, S. (2012). Improving livelihood of rural women through income generating activities in Bangladesh, Division of Agricultural Economics, Humboldt University, Berlin.
Sundararajan, V., & Errico, L. (2002). Islamic Financial Institutions and products in the global financial system: Key issues in risk management and challenges ahead, Working Paper No. 02, International Monetary Fund, Washington, D.C.
West, P. W. (2016). Simple random sampling of individual items in the absence of a sampling frame that lists the individuals, New Zealand Journal of Forestry Science, 46(1), 15-21.
Ahmed, A. (2010). Global financial crisis: an Islamic finance perspective”, International Journal of Islamic and Middle Eastern Finance and Management, 3(4), 306-320.
Ahmed, H. (2009). Financial crisis, risks and lessons for Islamic finance, ISRA International Journal of Islamic Finance, 1(1), 7-32.
Akhter, W. (2010). Takaful Models and Global Practices. Journal of Islamic banking and finance, 27(1), 30-44.
Ather, S. M. (2007). Islamic Management and Business, Noksha Publications, Chittagong.
Aziz, Z. A. (2006). Islamic Banking and Finance Progress and Prospects Collected Speeches: 2000-2006, Bank Negara Malaysia, Kuala Lumpur.
Bakar, M. Z. A., & Bakar, S. A. (2020). Prudent Financial Management Practices among Malaysian Youth: The Moderating Roles of Financial Education. The Journal of Asian Finance, Economics, and Business, 7(6), 525-535.
Bakkeri, A., & Ali, A. B. (2020). PROFITABILITY OF ISLAMIC BANKS: A PANEL DATA ANALYSIS. Indian Journal of Finance and Banking, 4(3), 26-38. https://doi.org/10.46281/ijfb.v4i3.811
Bashir, M. S., & Mail, N. H. H. (2011). Consumer perceptions of Islamic insurance companies in Brunei Darussalam, International Journal of Emerging Sciences, 1(3), 285-307.
Dillon, W. R. & Goldstein, M. (1984). Multivariate Analysis: Methods and Applications, John Wiley & Sons, New York.
Divanna, J. (2009). A new wave in Banking: Islamic Finance, The Banker, available at: http://ec2-54-72-50-240.eu-west-1.compute.amazonaws.com/Markets/Islamic-Finance/A-new-wave-in-banking (accessed 6 June 2019).
Fauzi, P. N. F. N. M., Abd Rashid, K., Sharkawi, A. A., Hasan, S. F., Aripin, S., & Arifin, M. A. (2016). Takaful: A review on performance, issues and challenges in Malaysia, Journal of Scientific Research and Development, 3(4), 71-76.
Field, A. (2000). Discovering Statistics using SPSS for Windows, Sage Publications Ltd, London.
Fiennes, T. (2007). Supervisory implications of Islamic banking: A supervisor's perspective, in Archer S. and Karim R. A. A. (Ed.), Islamic finance: the regulatory challenge, John Wiley & Sons (Asia) Pte. Ltd., Singapore, 247-256.
Hasan, Z. (2015). Risk sharing versus risk transfer in Islamic Finance: A critical appraisal, ISRA International Journal of Islamic Finance, 7(1), 7-24.
Haseeb, M. (2018). Emerging issues in islamic banking & finance: Challenges and Solutions, Academy of Accounting and Financial Studies Journal, 22, 1-5.
Hatcher, L. (1994). A step-by-step approach to using the SAS(R) system for factor analysis and structural equation modeling, SAS Institute Inc., Cary, NC, USA
Hossain, B. (2014). Poverty reduction during 1971-2013 periods: Success and its recent trends in Bangladesh, Global Journal of Human-Social Science Research, 14(1), 39-47.
Htay, S. N. N. & Salman, S. A. (2013). Shari'ah and Ethical Issues in the Practice of the Modified Mudharabah Family Takaful Model in Malaysia, International Journal of Trade, Economics and Finance, 4(6), 340.
Iqbal, M., Aḥmad, A., & Khan, T. (1998). Challenges facing Islamic banking, Islamic Research and Training Institute, Jeddah.
Isa, M. Y., Rahim, A., Khilmy, A., Mohamed Naim, A., & Wahab, M. Z. (2017). The issues of second layer charging fee in Wakalah Takaful model practices, International Review of Management and Marketing, 7(2), 378-383.
Islam, A. B. M. (2005). Islamic Constitution: Quranic and Sunnatic Perspectives, Professors Publication, Dhaka.
Jaffer, S., Ismail, F., Noor, J., Unwin, L., & Ajayi, D. (2010). Takaful (Islamic Insurance): Concept, Challenges, and Opportunities. Milliman Research Report.
Kahf, M., & Khan, T. (1992). Principles of Islamic Financing, Islamic Research and Training Institute and Islamic Development Bank, Jeddah.
Kammer, M. A., Norat, M. M., Pinon, M. M., Prasad, A., Towe, M. C. M. and Zeidane, M. Z. (2015). Islamic finance: Opportunities, challenges, and policy options, IMF SDN No. 15, International Monetary Fund, April.
Khan, I., Rahman, N. N. B. A., Yusoff, M. Y. Z. B. M., & Nor, M. R. B. M. (2016). History, problems, and prospects of Islamic insurance (Takaful) in Bangladesh, Springer Plus, 5(1), 785-791.
Khan, M. F. (2007). Setting standards for Shariah application in the Islamic financial industry, Thunderbird International Business Review, 49(3), 285-307.
Khan, T., & Ahmed, H. (2001). Risk management: an analysis of issues in Islamic financial industry, Islamic Development Bank, Islamic Research and Training Institute, Jeddah.
Lavrakas, P. J. (2008). Encyclopaedia of survey research methods, Sage Publications, Thousand Oaks, CA
Maghrebi, N., & Mirakhor, A. (2015). Risk Sharing and Shared Prosperity in Islamic Finance, Islamic Economic Studies, 23(2), 85-115.
Mamun, A., Uddin, M. R., & Islam, M. T. (2017). An Integrated Approach to Islamic Microfinance for Poverty Alleviation in Bangladesh. ÜniversiteparkBülten, 6(1), 32.
Mohammed, E. (2005). Islamic Finance Gears Up, Finance and Development, 42(4), 46.
Naushad, M., Faridi, M. R., & Faisal, S. (2020). Measuring the Managerial Efficiency of Insurance Companies in Saudi Arabia: A Data Envelopment Analysis Approach. The Journal of Asian Finance, Economics, and Business, 7(6), 297-304.
Nunnaly, J. (1978). Psychometric theory, McGraw-Hill, New York.
Ochieng, G. O. (2013). Challenges in the Adoption of Takaful Insurance in Kenya, Doctoral dissertation, University of Nairobi, Nairobi.
Pallant, J. (2013). SPSS Survival Manual: A Step by Step guide to data analysis using IBM SPSS, McGraw Hill, Berkshire, England.
Pandey, I. M. & Ongpipattanakul, V. (2015). Agency behavior and corporate restructuring choices during performance decline in an emerging economy.” International Journal of Managerial Finance, 11(2), 244-267.
Rahman, A. M. (2018). Voluntary insurance for ensuring risk-free on-the-go banking services in market competition: A proposal for Bangladesh. Journal of Asian Finance, Economics and Business, 5(1), 17-27.
Rahman, A., Ahmad, W. M. W., & Buang, A. H. (2011). Can a takaful company reinsure with a reinsurance company?” African Journal of Business Management, 5(30), 11768-11778.
Saleh, M. M. (2016). Challenges in takaful application within conventional insurance framework in Nigeria: The imperative for legislative harmonization of regulatory instruments, Doctoral dissertation. Faculty of Law, University of Malaya, Malaysia.
Salman, A., & Nawaz, H. (2018). Islamic financial system and conventional banking: A comparison, Arab Economic and Business Journal, 13(2), 155-167.
Sarwar, M. J. (2016). Future Challenge in Islamic Insurance (Takaful) in Bangladesh”, Australian Journal of Sustainable Business and Society, 2(1), 69-80.
Sheheli, S. (2012). Improving livelihood of rural women through income generating activities in Bangladesh, Division of Agricultural Economics, Humboldt University, Berlin.
Sundararajan, V., & Errico, L. (2002). Islamic Financial Institutions and products in the global financial system: Key issues in risk management and challenges ahead, Working Paper No. 02, International Monetary Fund, Washington, D.C.
West, P. W. (2016). Simple random sampling of individual items in the absence of a sampling frame that lists the individuals, New Zealand Journal of Forestry Science, 46(1), 15-21.
Published
2021-01-31
How to Cite
Islam, S., Mamun, A., Islam, K. M. A., Uddin, M. R., & Sultana, T. (2021). ISSUES AND CHALLENGES OF FINANCIAL MANAGEMENT PRACTICES IN ISLAMIC FINANCIAL INSTITUTIONS: EMPIRICAL EVIDENCE FROM BANGLADESH. Indian Journal of Finance and Banking, 5(1), 38-55. https://doi.org/10.46281/ijfb.v5i1.963
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2021 Serajul Islam, Abdullahil Mamun, K. M. Anwarul Islam, Mohammad Rahim Uddin, Tania Sultana
This work is licensed under a Creative Commons Attribution 4.0 International License.
