National and Global Islamic Financial Architecture:
Prolems and Possible Solutions for the OIC Member Countries
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countries has an arrangement for getting Shariah input for cases involving Islamic finance in
civil courts. Even though Islamic financial disputes will be tried in civil courts in Oman, the
court uses Shariah in dealing with contracts. In Pakistan, there is a Shariah appellate court and
in Malaysia a bench in the high court deals with disputes related to Islamic finance. The courts
in these countries refer any Shariah related issues to a central Shariah Advisory Council/Board
for suggestions. The third group of countries have Islamic arbitration centers. Countries in this
group include Indonesia, Malaysia, Sudan and UAE. The final group does not have any specific
arrangements for Islamic finance cases and disputes will be adjudicated in civil courts using
the laws of the country. The lack of dispute resolution framework in Bangladesh, Egypt,
Nigeria, Senegal and Turkey introduces legal risks in Islamic finance.
Table ‎6.3: Status of Dispute Resolution Framework for Islamic Finance
Legal Infrastructure: Dispute
Resolution
Countries
Islamic Courts Saudi Arabia, Sudan
Dispute Resolution for Islamic
finance (Shariah inputs in civil
courts)
Malaysia, Oman, Pakistan
Dispute Resolution for Islamic
finance (arbitration centers)
Indonesia, Malaysia, Sudan, UAE
Civil courts Bangladesh, Egypt, Nigeria, Senegal, Turkey
Bankruptcy Framework and Resolution of Banks
The bankruptcy framework and resolution of banks framework in the case studies can be
separated into two categories. Firstly there are countries that have specific issues in their
bankruptcy and bank resolution framework that have specific issues dealing with unique
features of Islamic finance (Malaysia, Oman, Pakistan and Sudan). Secondly, in the remaining
countries a single bankruptcy framework applies to all financial institutions including the
Islamic ones.
Table ‎6.4: Status of Bankruptcy Framework
Legal Infrastructure: Bankruptcy
and Resolution of Banks
Countries
Specific bankruptcy for Islamic
finance
Malaysia, Oman, Pakistan, Sudan,
Single bankruptcy/resolution
arrangement
Bangladesh, Egypt, Indonesia, Nigeria, Saudi Arabia,
Senegal, Turkey, UAE
6.1.2. Regulation and Supervision
The case-studies show different types of overall regulatory frameworks for various financial
sectors. While there may be a single regulatory body for all three financial sectors (such as OJK
in Indonesia), in most other countries there are multiple regulatory bodies for various sectors.
A few countries separate individual regulators for each of the three sectors (such as
Bangladesh, Nigeria, Senegal, Sudan, Turkey, and the UAE. In most of these countries the
central bank regulates the banking sector and in some countries it also regulates the
insurance/takaful sectors (e.g., Malaysia, Saudi Arabia). The capital market is regulated by
separate capital market regulators and in some cases this regulatory body also regulates the
insurance/takaful sectors (Egypt, Oman, Pakistan).