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Attaining Standardization in Islamic Banking Institutions in Pakistan: Analysis on Ijarah Financing

Author

Listed:
  • Shujaat Saleem

    (Department of Business Administration, Iqra University, Karachi 75500, Pakistan)

  • Umair Baig

    (Department of Commerce, Benazir Bhutto Shaheed University, Karachi 75660, Pakistan)

  • Ieva Meidute Kavaliauskiene

    (Department of Business Technologies and Entrepreneurship, Vilnius Gediminas Technical University, 10223 Vilnius, Lithuania)

  • Mehboob Ul Hassan

    (College of Business Administration, King Saud University, Riyadh 11451, Saudi Arabia)

  • Fadillah Mansor

    (Department of Shariah and Management, University of Malaya, Kuala Lumpur 50603, Malaysia)

Abstract

This paper aims to explore the practices of Ijarah financing by Islamic banks in Pakistan pertaining to compliance with the AAOIFI Shariah Standard (9) on Ijarah financing. Primary data were gathered from the respondents of the five (5) full-fledged Islamic banks in Pakistan by administering semi-structured face-to-face interviews along with secondary data obtained from the contractual agreements on Ijarah financing. Qualitative content analysis was undertaken by employing NVivo software. The findings reveal discrepancies in the practices of Ijarah financing pertaining to two clauses of the AAOIFI Shariah Standard and emerging major challenges and/or problems facing the Islamic banking industry, including (1) a lack of standardization, (2) an insufficient regulatory and supervisory framework, and (3) a dearth of awareness of the Islamic banking products and/or takaful operations (especially among corporate customers). The study accrues both academic and practical implications. It not only adds value to the existing literature on Islamic finance but also serves as a guide for the Islamic banking industry in Pakistan. The study is useful to harmonize and standardize the practices of Ijarah financing by the contemporary Islamic banks in Pakistan as the Islamic Banking Division (IBD) of the State Bank of Pakistan (SBP) made it compulsory for Islamic banks to adopt AAOIFI Shariah Standard No. (9) on Ijarah financing.

Suggested Citation

  • Shujaat Saleem & Umair Baig & Ieva Meidute Kavaliauskiene & Mehboob Ul Hassan & Fadillah Mansor, 2022. "Attaining Standardization in Islamic Banking Institutions in Pakistan: Analysis on Ijarah Financing," JRFM, MDPI, vol. 15(10), pages 1-14, September.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:10:p:430-:d:925939
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    References listed on IDEAS

    as
    1. Nurfarahin M. Haridan & Ahmad F. S. Hassan & Yusuf Karbhari, 2018. "Governance, religious assurance and Islamic banks: Do Shariah boards effectively serve?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(4), pages 1015-1043, December.
    2. Hussam Musa & Viacheslav Natorin & Zdenka Musova & Pavol Durana, 2020. "Comparison of the efficiency measurement of the conventional and Islamic banks," Oeconomia Copernicana, Institute of Economic Research, vol. 11(1), pages 29-58, March.
    3. Shujaat Saleem & Fadillah Mansor, 2020. "Exploring Compliance of AAOIFI Shariah Standard on Ijarah Financing: Analysis on the Practices of Islamic Banks in Malaysia," JRFM, MDPI, vol. 13(2), pages 1-13, February.
    4. Wilson, Rodney, 1994. "Development Of Financial Instruments In An Islamic Framework," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 2, pages 103-115.
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