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Credit Management in Full-Fledged Islamic Bank and Islamic Banking Window: Towards Achieving Maqasid Al-Shariah

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  • Najihah Muhammad
  • Sharifah Faigah Syed Alwi
  • Nabihah Muhammad

Abstract

The percentage of non-performing loans (NPL) and non-performance financing (NPF) in Malaysia commercial banks is under control and does not increase in its percentage since the year 2014 to 2016. These scenarios are the result of the stringent credit management procedures in the commercial banks which if not properly followed could affect banks¡¯ profitability and liquidity. However, there are critics by the public on how Islamic banks normally tend to punish their customers who are the real traders or businessman without fixed monthly income when they slightly late in paying their periodical payment for the bank¡¯s facility or financing. Islamic bank is supposed to help the customer in order for it to achieve maqasid al-Shariah (objectives of Shariah). Thus, this study intends to compare the credit management¡¯s procedure in one of the full-fledged Islamic banks and one of the conventional banks which also offer Islamic banking window. This study also aims to identify the achievement of maqasid al-Shariah through the procedures of credit management in the two banks. This study adopted the qualitative methodology where semi-structured interviews are conducted with 2 bankers from one of the full-fledged Islamic banks and one of the conventional banks which also offer Islamic banking window. Results from this study indicated that each banks has their own strategies and procedures with regard to credit management. Their credit management plans were structured to help customers to secure their loans, financing and assets as well as protecting them from bankruptcy and insolvency which basically comply with maqasid al-Shariah. From this study, it is recommended for commercial banks to apply a strict approval process for loan and financing as well as a strict credit monitoring system to avoid NPL and NPF.

Suggested Citation

  • Najihah Muhammad & Sharifah Faigah Syed Alwi & Nabihah Muhammad, 2020. "Credit Management in Full-Fledged Islamic Bank and Islamic Banking Window: Towards Achieving Maqasid Al-Shariah," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 92-99, June.
    • Handle: RePEc:jfr:ijfr11:v:11:y:2020:i:3:p:92-99
    DOI: 10.5430/ijfr.v11n3p92
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    References listed on IDEAS

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    1. Dimitrios, Anastasiou & Helen, Louri & Mike, Tsionas, 2016. "Determinants of non-performing loans: Evidence from Euro-area countries," Finance Research Letters, Elsevier, vol. 18(C), pages 116-119.
    2. Asyraf Wajdi Dusuki & Abdulazeem Abozaid, 2007. "A Critical Appraisal On The Challenges Of Realizing Maqasid Al-Shariaah In Islamic Banking And Finance," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 15(2), pages 999-1000, December.
    3. Mohd Zaini Abd Karim & Sok-Gee Chan & Sallahudin Hassan, 2010. "Bank Efficiency and Non-Performing Loans: Evidence from Malaysia and Singapore," Prague Economic Papers, Prague University of Economics and Business, vol. 2010(2), pages 118-132.
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