5.Conceptual_Framework_of_Islamic_Banking_and_Finance__An_Alternative_Approach_Based_on_Existing_Mod

5.Conceptual_Framework_of_Islamic_Banking_and_Finance__An_Alternative_Approach_Based_on_Existing_Mod

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1 CONCEPTUAL FRAMEWORK OF ISLAMIC BANKING & FINANCE: AN ALTERNATIVE APPROACH BASED ON EXISTING MODELS ABSTRACT Islamic banking industry is tremendously growing worldwide and no exception in the case of Malaysia. Malaysian Government is very supportive for the development of the Islamic banking and to ensure that Malaysia will become the center and the heart of the Islamic banking and finance. Even though, the rapid growth of the Islamic banking in Malaysia, it has been criticized for fulfilling or discharging the responsibility of Islamic institutions. A few researchers such as Halim and Chapra have come out the Islamic banking models. However, in the researchers’ opinion, these models need to be modified after considering the current Islamic banking practices and so far, no research has been done on it. Therefore, the purpose of this research is to propose the alternative conceptual framework on which true Islamic banking should be founded. It is believed that this research will provide a foundation to further research in Islamic banking and finance. KEYWORDS: Islamic banking, Islamic banking models, Halim model, Chapra model, Conceptual framework
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2 1.1 INTRODUCTION Banking is the main support and backbone of any country economy and any country is not being able to escape from baking system. However, the practices of conventional banking system are unlawful and prohibited from the Islamic perspective. The main reason for prohibition is due to riba (interest) and hence, for the muslims , it is necessary to have Islamic banking system. Many researchers have conducted the research in Islamic banking and finance and most of the researchers have looked at the efficiency and profitability of Islamic banks. So far, to the researchers’ knowledge, no researcher has introduced the conceptual framework on which true Islamic banking and finance should be founded on. Hence, the objective of this research paper is to propose the Islamic banking and finance conceptual framework after critically reviewing the existing models and criticisms of current Islamic banking practices. The organization of this paper is presentation in five sections. The second section explains the existing models of Islamic banking and finance and their comparison. The third section highlights the major criticisms of the current Islamic banking practices. The fourth section proposes the conceptual framework of Islamic banking and finance after critically reviewing the existing models and taking into considers the problems of current practices. The last section concludes. 2.1 EXISTING MODELS FOR ISLAMIC BANKING AND FINANCE Under this section, mainly two models, i.e Halim model and Chapra model will be discussed. In addition, comparison of two models will be elaborated.
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