Legal framework of Islamic banking in the Kurdistan region : a comparative analysis with Malaysia

Abstract

The operation of Islamic banking business in the Kurdistan Region has been growing steeply owing to the rapid growth of investment and the stability of economic and political conditions. Nevertheless, this sector still inflicts serious legal issues with regard to the governing of the Islamic financial institutions and SharyÑh governance. Therefore, this research examines the current legal framework of Islamic banking in the Kurdistan Region by comparing it with Malaysia with the view of answering all questions on the various statutes that govern the Islamic banking activities and their role in the implementation of SharyÑh compliance with the purpose of providing appropriate recommendations in the light of the Malaysian experience. In the present thesis, an analysis and descriptive method were adopted in combination with a comparative approach. In line with this, library resources such as books, thesis, articles, papers and journals were utilized. Furthermore, the relevant statutory provisions and guidelines were also analyzed and explored to comprehend whether the existing regulatory system is sufficient to facilitate the smooth running of the Islamic banking business. The research maintained that although the governments in Malaysia and the Kurdistan Region have taken several attempts in the form of amendments, reviews and introduction of acts, the legal issues, particularly in Kurdistan, are still arising. It has been also established that the SharyÑh board under the existing regulatory system is not supported sufficiently in the Kurdistan Region, especially in respect of its authority, responsibilities and membership, and hence seems to be inefficient in implementing SharyÑh compliance. Therefore, it is recommended for the Kurdistan Region to introduce a specific and comprehensive act in relation to governing the Islamic banking industry. The relevant laws also need to be amended and revised urgently to facilitate the enhancement of the operations of the Islamic banking business. The research also suggests that the SharyÑh board should be assigned the highest authority and enables its decisions to be binding not only within the IFI but also over court proceedings. Furthermore, it is also recommended that the national level of the SharyÑh board needs to be recognized by the legal framework in the Kurdistan Region to preclude the proliferation of different SharyÑh views which might cast doubt on the legitimacy of the Islamic banking products and services. Finally, it is contemplated that if all recommendations propounded by the research are appropriately regarded for and incorporated into the current legislation, the legal obstacles could be diminished and the Islamic banking industry may progress and develop hastily in the Kurdistan Region.