Abstract
In order to maintain and uphold the institution of Islamic banking for future generations, it is vital to resolve potential conflicts that are faced by the Islamic banking sector. Malaysia is currently facing legislative conflicts between Islamic law and civil law, even after more than 30 years since the establishment of Islamic banking. Several court cases have proven that there are many conflicting issues in the Malaysian Islamic banking sector, which have posed a challenge to the Islamic financial system in Malaysia. This article aims to construct a harmonized legal framework between Islamic law and civil law in regulating the industry of Islamic banking, particularly through the enforcement of the Contracts Act 1950 and the Evidence Act 1950. The type of research carried out for the purpose of this paper is doctrinal legal research. The data sources were gathered and analysed using content analysis and critical analysis methods. The results showed that there are some statutory provisions in the abovementioned statutes which are not compatible with the principles of Islamic banking. As such, several recommendations have been suggested in order to harmonize the legal conflicts as they occur in the statutory provisions. Lastly, the outcomes of this research are expected to assist the harmonization process of legislation together with the intention of facilitating the development of the Islamic banking industry in Malaysia.
Highlights
It is an undeniable fact that the exact period of the introduction of Islamic banking is not traceable since different sources have indicated different periods of its origin (Iqbal & Mirakhor, 2007)
Results & Discussion Generally, the Contracts Act 1950 is an Act related to contracts as stated in its preamble
There is the Partnership Act 1961 which governs the relationship and agreements made between partners that form partnerships, the Hire Purchase Act 1967 which describes the rules related to hire-purchase agreements, the Sales of Goods Act 1967 that deals with the requirements under sale of goods, and the Companies Act 1965 that deals with the contractual agreement involved in the formation of companies
Summary
It is an undeniable fact that the exact period of the introduction of Islamic banking is not traceable since different sources have indicated different periods of its origin (Iqbal & Mirakhor, 2007). The most important thing which has been decided by most Muslim scholars is the fact that Islamic banking dates back to the period of Prophet Muhammad SAW. Some researchers claimed that even though banks did not exist during the period of Prophet Muhammad. Some scholars claim that due to its basis in Islam, Islamic finance may represent a better option (Mansour et al 2015). Whatever it is, it keeps growing at a constant rate, and has demonstrated unprecedented development over the last two decades, despite the inconsistency of existing legal frameworks and business routines. The volume of Islamic finance resources has already reached US $ 1,460 billion, with operations in more than 50 countries by the end of 2012 (Hanif, 2014)
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