VALUE-BASED INTERMEDIATION AND REALISATION OF MAQASID AL-SHARIAH: ISSUES AND CHALLENGES FOR ISLAMIC BANKS IN MALAYSIA

Abstract

The expectation of stakeholders towards Islamic banks has changed and goes beyond avoiding riba and compliance with Shariah but to become value-based intermediaries and fulfil the objective of Shariah Many studies argue that the goals of Islamic banking should not be restricted to maximizing shareholder wealth but should also entail raising the standard of living and welfare of the community. This paper aims to discuss the issues, trends, and challenges for Islamic banking in Malaysia towards satisfying various stakeholders’ needs through the implementation of value-based intermediation (VBI). VBI has been firstly introduced by Bank Negara Malaysia in 2017. In VBI, maqasid al-shariah is established as the fundamental framework in deciding the underlying values, moral compass, and goals in Islamic finance. Thus, realisation of maqasid al-shariah has created its own challenges in VBI implementation. Some earlier studies have discussed issues related to the principles and approaches related to VBI but neglecting other important mechanisms to drive its successful implementation. This review paper highlighted that corporate governance and performance measures are essential elements in VBI implementation. Future studies are encouraged to further explore the possible indicators that can fairly assess the efforts of Islamic banks in satisfying stakeholder needs in line with maqasid al-shariah. Further studies in corporate governance also deemed important to establish the relationship between the key corporate governance players and stakeholder management in Islamic banks.