RESPONSIBILITIES OF CUSTOMERS AND ISLAMIC BANKS TO MANAGE AND RECOVER NON-PERFORMING FINANCING

Abstract

This paper is to study the responsibilities of the customers and Islamic banks in managing the non-performing financing in Malaysia. This research is also to examine the provisions of the facility agreement by three different Islamic banks to analyze the treatment of non-performing financing by the banks. The researcher employs qualitative methodology whereby this study is based on analysis of primary data from an interview with representative of Bank A to determine the mechanism used by Bank A to recover the non-performing financing as well as secondary data. Secondary data was obtained by looking up to the relevant provisions from the facility agreement of the three Islamic banks in respect of an event of default and compensation, collection of information from Bank Negara Malaysia’s Policy Documents and Guidelines, case law from Lexis Nexis, books, articles and journals relevant with the research topic. This study is aimed to reveal the responsibilities of the customers and Islamic banks in managing and handling the non-performing financing as well as examine the measures taken by Bank A to recover its non-performing financing. This research is significant in attempt to highlight the obligations of the customers on their financing as well as the treatment by Islamic banks in assisting and dealing with the non-performing financing.