Legal Protection of Islamic Banks, Challenges and Solutions

Abstract

The Islamic banking industry is an important part of the financial system in any country that has this type of banking. Islamic banking institutions are regulated by several laws and regulations as same as conventional banks. The Islamic banking Act and general banking law, financial laws, and other related laws are the main piece of law for organizing the Islamic banking system. One of the main challenges that facing Islamic banking institutions is the lack of a legal framework to protect Islamic banking and manage these banks. The legal framework of the Islamic banking industry includes special Islamic banking law and other laws that have relation to Islamic banks such as finance law and company law. The two main legal challenges of Islamic banking institutions is lack of legal framework and lack of Sharia court to deal with disputes and issues relating to Islamic banking cases. thus, it is necessary for Islamic banking institutions to have special Islamic banking law and provisions in other law that they regulate Islamic banking institutions. Therefore, enacting Islamic banking law and amending some other laws to include the Islamic banking industry is needed. Furthermore, establishing a Sharia court to settle Islamic banking cases when there are disputes. Alternatively, appointing Shariah experts and professionals in Islamic banking issues in civil court can be an alternative solution for dealing with Islamic banking cases. Purpose of The Paper: The purpose of this study is to find out the legal challenges that face Islamic banks, and then find proper solutions for these challenges. Methodology and Approach: The qualitative method-based is applied for this study as qualitative research is a proper method for conducting this type of research. The study uses various documents and content analysis approach to understand and analyse the nature of legal challenges of Islamic banking institutions. In this paper, both primary and secondary materials are part of the data collection. Thus, Acts, books, academic journals are used for collecting data for the purpose of this research.  Findings: It is found that the current legal framework of the Islamic banking industry needs to be reformed to be a proper legal framework. Therefore, related laws and regulations to Islamic banks should be amended to cover Islamic banking institutions. In addition. Islamic banking Act is necessary to be enacted for regulation Islamic banks. Furthermore, establishing a Sharia court or appointing qualified Shariah scholars in civil court is necessary for resolving legal challenges that face Islamic banking institutions.

Keywords: Islamic Banking, Legal Issues, Shariah Court, Civil Court

DOI: 10.7176/JLPG/107-10

Publication date:March 31^st 2021