Umar Aimhanosi Oseni

Dispute Resolution in Islamic Banking and Finance: Current Trends and Future Perspectives

The current legal framework for dispute resolution in the Islamic banking and finance industry in developing countries may not adequately serve the purpose for which the financial institutions were set up. Meanwhile, the Islamic legal framework for dispute resolution has established rules for financial disputes as recognized under the classical law. This paper examines the current practice of dispute resolution in Islamic banking and finance with case analyses of selected Muslim countries. From our findings, disputes emanating from this industry are heard by the conventional courts and tribunals which, in most cases, do not have the requisite expertise. It is argued that since Islamic banking and finance disputes are sui generis, the panel of judges must be composed of experts in the field. The paper concludes that a legal framework should be established for dispute resolution in countries where Islamic banking and finance is being implemented. For a proper Islamization of the banking and finance sector, disputes arising from this sector should not be subjected to the convoluted conventional rules. The paper proposes a legal framework for dispute resolution in the Muslim world based on hybrid processes of Alternative Dispute Resolution (ADR) recognized in Islamic law.

Sharī‘ah court-annexed dispute resolution of three commonwealth countries – a literature review

Purpose – The purpose of this study is to examine the legal framework for court-annexed dispute resolution in courts with Sharī‘ah jurisdiction in Nigeria, Malaysia and Singapore. The major part of the study is dedicated to propose reforms in the administration of justice system in the courts with Sharī‘ah jurisdiction in Nigeria and the relevance of such reforms to the ongoing reforms in the Middle East and North African (MENA) countries. Design/methodology/approach – This is an integrative literature review, which adopts a comparative approach in analyzing the conceptual framework of amicable dispute resolution in the modern world with particular reference to the Sharī‘ah court. Findings – The findings of this research illustrate the adaptability of the practices in Malaysia and Singapore in the courts with Sharī‘ah jurisdiction in Nigeria and the MENA region. Practical implications – An exposition of the dispute resolution processes in Islamic law reveals the relevance of these processes in modern refo...

Towards a global hub: The legal framework for dispute resolution in Malaysia’s Islamic finance industry

Purpose – The paper aims to examine significant developments in the institutional framework for dispute resolution in the Islamic finance industry in Malaysia. Malaysia, as part of its efforts to consolidate its enviable Islamic finance industry, has strengthened its institutional framework for dispute resolution. Design/methodology/approach – Data for this study were collected from both primary and secondary legal sources. Through a conceptual legal analysis, the institutional frameworks of dispute resolution in the Malaysia’s Islamic finance industry are studied. Findings – The study finds that Malaysia is far ahead of other jurisdictions by a significant margin in spearheading reforms in the emerging global Islamic finance industry. The dispute resolution framework has been largely affected by the recent reforms. Research limitations/implications – Other jurisdictions may borrow a leaf from Malaysia’s initiative in providing a robust legal framework for dispute management in the Islamic finance industr...

The regulation and supervision of sukuk in global capital markets

There is no doubt that the rate at which sukuk financing has been accepted in different jurisdictions outside the usual Muslim-majority countries is encouraging. This seemingly considerable feat comes with much responsibility and a proactive role for Shar_‘ah scholars and regulators. The chapter examines prevailing practices in the market and the need to enhance the Shar_‘ah compliance of the processes through proper regulation and follow-up supervision of sukuk transactions, particularly the underlying contracts. To this end, law and Shar_‘ah should complement each other with a view to ensuring compliance with the laid-down rules. A number of fundamental legal issues that are important in the ICM and consequently applicable to sukuk transactions have been raised. Some of these legal issues are either taken for granted during the drafting stage or assumed to be effective even though the philosophy underlying such issues differs from the original value proposition of Islamic economics. Therefore, it is incumbent on the stakeholders not only to promote a commercially viable industry but also to ensure that Shar_‘ah principles are observed at all stages of sukuk transactions. This is where regulation and supervision intercept in the general framework of Islamic finance.

Blazing the trail: the institutional framework for dispute resolution in Malaysia’s Islamic finance industry

The dispute resolution framework in Islamic finance as practiced in most countries has proven to be inadequate, particularly in its application and interpretation of the Sharīah. Malaysia has consistently proven its prime position in blazing the trail in most legal and regulatory issues in the Islamic finance industry. It has recognised the increasing importance of the architectural aspects of the industry such as the need to establish the dispute resolution framework.

The legal implications of 'Fatwā Shopping' in the Islamic finance industry: Problems, perceptions and prospects

This article examines the occurrence and legal implications of ‘fatwā shopping’ in the Islamic finance industry and the need to put the proper legal mechanisms in place to regulate the phenomenon. It provides a case study of the existing legal restrictions in some jurisdictions with a centralised Sharīʿah Supervisory Board at the national level such as in Malaysia. As a preliminary review of the implications of ‘fatwā shopping’ in the industry, this study examines the consequential problems, current perceptions and prospects of such practice. The study finds that instances of ‘fatwā shopping’ are common in cross-border Islamic finance transactions such as cross-border ṣukūk transactions where there is less regulation.

Banking on ICT: The relevance of online dispute resolution in the Islamic banking industry in Malaysia

In order to keep the cost of settling disputes low and standards for grievance remedial methods high, access to justice is paramount in todays fast pace commercial transactions in the digital world. In Malaysia, the successes recorded in the Islamic banking industry do not just flourish without some consequential challenges such as the increasing rate of disputes involving Islamic financial products and services. Though the number of widely reported cases heard and determined by the courts between 1985 and 2010 are about 20, the Financial Mediation Bureau seems to be more active in dispute resolution in the industry. This study seeks to explore the relevance of such mechanism that would use five distinct but connected modules for dispute settlement. This pioneering research introduces a new dimension in the sustainability of the economy by leveraging the state-of-the-art information and communication technology (ICT) in resolving banking disputes in the Islamic finance industry in Malaysia. Exploring the relevance of such online dispute resolution platform for Islamic finance disputes will serve as a launch pad for further studies that will involve the design and application of such technology in the Islamic finance industry.

Dispute management in Islamic financial institutions: a case study of near sukuk defaults

Purpose – The purpose of this paper is to examine the vital importance of dispute management in cases of both near and outright sukuk defaults. With the case studies, this study examines the vital importance of dispute management in cases of both near and outright sukuk defaults. With a number of case studies, the study shows how debt restructuring can play a significant role as a dispute management procedure recognized in Islamic law. Design/methodology/approach – The study uses the case study methodology to determine the impact of debt restructuring in instances of near and outright sukuk default and the process taken to reach a win-win settlement among the parties. Due to some sensitive financial information, the study has fully anonymized the sukuk companies examined. Findings – The paper finds that for a more sustainable and stable and resilient Islamic finance industry, the role of law through dispute management cannot be ruled out, as appropriate dispute management mechanism facilitates the underly...

The feasibility of adopting Islamic banking system under the existing laws in Uganda

Purpose - In 2014, Islamic finance assets are estimated to have exceeded USD 2 trillion with over 100 products and an annual growth of over 20.7%,across more than 76 countries, most of which are members of the Organization of Islamic Cooperation (OIC). Despite this remarkable market expansion, numerous OIC members such as Uganda are yet to fully adopt this unique financial system due to regulatory constraints. Thus, the purpose of this paper is to examine the extent to which Uganda can benchmark the Malaysian experience and best practices to overcome the regulatory challenges in introducing Islamic banking. Design/methodology/approach - This exploratory study adopts qualitative research methods through documentary review to elicit relevant information from the existing laws in Uganda that would accommodate Islamic banking system. Interpretive analysis and analytical methods are used to analyze data. Findings - The Malaysian experience and best practices of Islamic banking regulation need to be benchmarked by regulators. Relevant laws which require some amendments include; section 37(a) and 38(1) of the Financial Institutions Act 2004 and section 29(3)(a) of the Bank of Uganda Act 2000. Similarly, tax legislation needs amendments to ensure a level playing field for Islamic finance and conventional finance products. Originality/value - This is one of the earliest studies on models of Islamic banking regulation suitable for adoption in Uganda. This study contributes to literature on how other jurisdictions (especially those with less regulatory prudence) could regulate Islamic banking in a dual banking system jurisdiction.

The feasibility of online dispute resolution in the Islamic banking industry in Malaysia: An empirical legal analysis

Purpose The paper examines the perceptions of three major stakeholders - bankers, lawyers and customers, in the Islamic banking industry in Malaysia in order to assess their behavioural intention to use the proposed Online Dispute Resolution (ODR) mechanism. Design/methodology/approach The study modifies the unified theory of acceptance and use of technology (UTAUT) within the context of ODR and its feasibility in the Malaysia Islamic banking industry. The model was extended to include trust in technology and trust in bank, which might have significant influence on the intentions of the major stakeholders to use ODR for banking–related disputes. Actual use of the ODR was not included in the model as specified in the original UTAUT. Based on an internet survey, responses were obtained from about 109 respondents. The data obtained were subjected to multivariate statistical analyses. Findings Results obtained indicate that ‘trust in technology’ and ‘effort expectancy’ are the most influencing determinants of...