SHARIAH COMPLIANCE FUNCTION IN MALAYSIAN

ISLAMIC BANK: CASE STUDY OF BANK

KERJASAMA RAKYAT MALAYSIA BERHAD

BY

AHMAD TURMUZI BIN HAMEZAH

A research paper submitted in fulfilment of the requirement

for the degree of Master of Science in Islamic Banking and

Finance

IIUM Institute of Islamic Banking and Finance

International Islamic University Malaysia

AUGUST 2014

ii

ABSTRACT

The aim of this study is to explore how Shariah Compliance Function is practised in

Malaysian Islamic bank and how different are the practices between pre and post

implementation of Shariah Governance Framework for Islamic Financial Institutions

which was issued by Bank Negara Malaysia. The study is a qualitative and

exploratory research. The research utilises a combination of library-based study and

semi-structured interview to achieve its objectives. Bank Kerjasama Rakyat Malaysia

Berhad (afterwards will be referred as Bank Rakyat) was chosen for case study of this

research. This study revealed that the implementation of Shariah Governance

Framework for Islamic Financial Institutions produces significant positive impact to

Shariah Compliance Function in Malaysian Islamic Bank. Nonetheless, it is not

accurate to assume that only after the implementation of Shariah Governance

Framework for Islamic Financial Institutions, Shariah Compliance Function exists in

Malaysian Islamic Bank. In addition, there are good practices which the researcher

believed should also be followed by other Islamic banks which are among others in

term of capacity of manpower and competency of officers which implement Shariah

Compliance Function.

iii

ملخص البحث

ABSTRACT IN ARABIC

في بنك إسلامي لتزام بالشريعة الهدف من هذه الدراسة هو استكشاف كيفية تطبيق أجهزة الا

إطار الحوكمة الشرعية للمؤسسات المالية تنفيذ وبعد بين قبل هاماليزي وكيف يختلف تطبيق

راسة فإن البحث بحث ومن حيث منهج الد .اليزيالم المركزي بنكال هصدر أالذي الإسلامية

دراسة مندمجة ماستخدابهذا البحث قام البحث تحقيق أهداف لأجل و .نوعي واستكشافي

كرجساما رعية بنك وقد تم اختيار . ومقابلة شبه منظمةسة على العمل المكتبي اما بين در

وكشفت هذه . لهذا البحث نموذجك) عيةبنك ر ب هإلي بعد ذلك سوف يشار( ماليزيا بيرهد

اكبير اإيجابي انتج أثر يإطار الحوكمة الشرعية للمؤسسات المالية الإسلامية دراسة أن تنفيذال

أيضا وبالإضافة، كشفت هذه الدراسة . اليزيمفي بنك إسلامي لتزام الشرعي أجهزة الاعلى

ممارسات جيدة في بنك رعية والتي يرى الباحث أن تتبناها بنوك إسلامية أخرى من هناكن أ

.لتزام بالشريعةرة وكفاءة بشرية التي تنفذ أجهزة الاحيث قد

iv

APPROVAL PAGE

I certify that I have supervised and read this study and that in my opinion, it conforms

to acceptable standards of scholarly presentation and is fully adequate, in scope and

quality, as a research paper for the degree of Master of Science in Islamic Banking

and Finance.

…………………………………..

Rusni binti Hassan

Supervisor

This research paper was submitted to IIUM Institute of Islamic Banking and Finance

and is accepted as a fulfilment of the requirement for the degree of Master of Science

in Islamic Banking and Finance.

…………………………………..

Syed Musa bin Syed Jaafar

Alhabshi

Dean, IIUM Institute of Islamic

Banking and Finance

v

DECLARATION

I hereby declare that this research paper is the result of my own investigation, except

where otherwise stated. I also declare that it has not been previously or concurrently

submitted as a whole for any other degrees at IIUM or other institutions.

Ahmad Turmuzi bin Hamezah

Signature……………….……. Date …..........................................

vi

COPYRIGHT PAGE

INTERNATIONAL ISLAMIC UNIVERSITY MALAYSIA

DECLARATION OF COPYRIGHT AND AFFIRMATION

OF FAIR USE OF UNPUBLISHED RESEARCH

Copyright ©2014 by Ahmad Turmuzi bin Hamezah. All rights reserved.

SHARIAH COMPLIANCE FUNCTION IN MALAYSIAN

ISLAMIC BANK: CASE STUDY OF BANK KERJASAMA

RAKYAT MALAYSIA

No part of this unpublished research may be reproduced, stored in a retrieval system,

or transmitted, in any form or by any means, electronic, mechanical, photocopying,

recording or otherwise without prior written permission of the copyright holder except

as provided below.

1. Any material contained in or derived from this unpublished research may

be used by others in their writing with due acknowledgement.

2. IIUM or its library will have the right to make and transmit copies (print

or electronic) for institutional and academic purposes.

3. The IIUM library will have the right to make, store in a retrieval system

and supply copies of this unpublished research if requested by other

universities and research libraries.

Affirmed by Ahmad Turmuzi bin Hamezah

……..……..…………… …………………..

Signature Date

vii

DEDICATION

This research is dedicated to my parents and siblings; Hamezah, Sity Rahmah,

Nornazihah, Luqmanul Hakim, Nurul Ain and Hamizah Shahirah.

viii

ACKNOWLEDGEMENTS

First and foremost, I am grateful and thankful to Allah (s.w.t.), the Most Giving, Most

Gracious, Most Merciful for giving me ni’mah, bless and protection. I would like to

express my love and thanks to my lovely mother, Sity Rahmah and beloved father,

Hamezah, for their unconditional love and continuous guidance in life. To my

siblings, thank you so much for being with me through thick and thin. I would not be

able to complete this thesis without my family’s support, strength and trust.

I want to convey my deepest thanks to the lecturers at IIUM Institute of Islamic

Banking and Finance, International Islamic University of Malaysia, for sharing their

knowledge and expertise throughout my studies. I offer my sincerest gratitude to my

supervisor, Assoc. Professor Dr. Rusni binti Hassan for your constant guidance and

supervision. This thesis would not have completed without you.

I would like to thank all my friends and the management at the Institute for your care

and concern. To whomever I have not mentioned here, really want to thank you from

the bottom of my heart.

ix

TABLE OF CONTENTS

Abstract .................................................................................................................... ii

Abstract in Arabic .................................................................................................... iii

Approval Page .......................................................................................................... iv

Declaration ............................................................................................................... v

Copyright Page ......................................................................................................... vi

Dedication ................................................................................................................ vii

Acknowledgements .................................................................................................. viii

List of Tables ........................................................................................................... xi

List of Figures .......................................................................................................... xii

List of Abbreviations ............................................................................................... xiii

CHAPTER ONE: INTRODUCTION ................................................................. 1

1.1 Background ............................................................................................ 1

1.2 Problem Statement ................................................................................. 3

1.3 Objectives .............................................................................................. 4

1.4 Scopes and Limitations .......................................................................... 5

1.5 Research Methodology .......................................................................... 6

1.6 Chapterisation ........................................................................................ 9

CHAPTER TWO: LITERATURE REVIEW .................................................... 12

2.1 Introduction ............................................................................................ 12

2.2 Pre Implementation of Shariah Governance Framework for Islamic

Financial Institutions .............................................................................. 13

2.3 Post Implementation of Shariah Governance Framework for Islamic

Financial Institutions .............................................................................. 17

2.4 Conclusion ............................................................................................. 19

CHAPTER THREE: SHARIAH GOVERNANCE ........................................... 21

3.1 Introduction ............................................................................................ 21

3.2 Shariah Governance Framework for Islamic Financial Institutions ...... 22

3.3 Guiding Principles on Shari’ah Governance Systems for Institutions

Offering Islamic Financial Services ....................................................... 27

3.4 Governance Standard for Islamic Financial Institutions ........................ 29

3.5 Conclusion ............................................................................................. 32

CHAPTER FOUR: SHARIAH COMPLIANCE FUNCTION ......................... 34

4.1 Introduction ............................................................................................ 34

4.2 Overview of Shariah Compliance Function ........................................... 35

4.3 Overview of Shariah Review Function .................................................. 37

4.4 Overview of Shariah Audit Function ..................................................... 39

4.5 Overview of Shariah Risk Management Function ................................. 46

4.6 Conclusion ............................................................................................. 47

CHAPTER FIVE: FINDINGS ............................................................................. 49

5.1 Introduction ............................................................................................ 49

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5.2 Shariah Review ...................................................................................... 50

5.3 Shariah Audit ......................................................................................... 50

5.4 Shariah Risk Management ..................................................................... 52

5.5 Analysis and Opinion ............................................................................. 52

5.6 Conclusion ............................................................................................. 55

CHAPTER SIX: CONCLUSION ........................................................................ 56

6.1 Introduction ............................................................................................ 56

6.2 Significant Findings ............................................................................... 56

6.3 Recommendations .................................................................................. 58

6.4 Suggestions for Future Study ................................................................. 59

REFERENCES ....................................................................................................... 60

xi

LIST OF TABLES

Table No. Page No.

4.1 Differences between External Audit and Internal Audit 40

4.2 Differences between Shariah Review and Shariah Audit 44

4.3 Differences between Shariah Review, Shariah Audit and Shariah Risk

Management 48

xii

LIST OF FIGURES

Figure No. Page No.

4.1 A model structure of roles, functions and reporting relationship of key

organs in the Islamic Financial Institutions stated in BNM SGF 45

xiii

LIST OF ABBREVIATIONS

BNM Bank Negara Malaysia

BNM SGF Shariah Governance Framework for Islamic Financial

Institutions (BNM/RH/GL_012_3) issued by Bank Negara

Malaysia

Bank Rakyat Bank Kerjasama Rakyat Malaysia

IBA Islamic Banking Act

BAFIA Banking and Financial Institution Act

TA Takaful Act

CBA Central Bank of Malaysia (Amendment) Act

BNM/GPS1 Guidelines and Procedures for Shariah Committee issued by

Bank Negara Malaysia

GSIFI Governance Standard for Islamic Financial Institutions issued

by Accounting and Auditing Organisation for Islamic Financial

Institutions

AAOIFI Accounting and Auditing Organisation for Islamic Financial

Institutions

IFSB-10 Guiding Principles on Shari’ah Governance Systems for

Institutions Offering Islamic Financial Services issued by

Islamic Financial Services Board

IFSB Islamic Financial Services Board

ASIFI Auditing Standard for Islamic Financial Institutions issued by

Accounting and Auditing Organisation for Islamic Financial

Institutions

PwC PricewaterhouseCoopers

IFI Islamic Financial Institutions

SAC Shariah Advisory Council

AGC Audit & Governance Committee

SSB Shari’a Supervisory Board

IIA Institute of Internal Auditors

IFSB-1 Guiding Principles on Risk Management for Institutions (Other

than Insurance Institutions) Offering issued by Islamic

Financial Services Board

1

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND

Bank Negara Malaysia (afterwards will be referred as “BNM”) issued Shariah

Governance Framework for Islamic Financial Institutions (BNM/RH/GL_012_3)

(afterwards will be referred as “BNM SGF”) which was effective starting from

January 2011 brought a new dimension and evolution phase in Malaysian Islamic

Banking. The issuance of BNM SGF indicates the commitment of regulator in

enhancing Shariah governance of Malaysian Islamic financial institutions.

One of the requirements stipulated in BNM SGF is the requirement for Islamic

Financial Institution to have a robust Shariah compliance function which encompasses

Shariah Review and Shariah Audit and supported by Shariah Risk Management

functions. Hence, this study is intended to explore the general overview on differences

of the implementation before and after the issuance of BNM SGF. This study is also

intended to explore the general overview of the approaches conducted by the

Malaysian Islamic bank in implementing those functions. Whether there are

differences in the approaches. If the differences are noted, the researcher intends to

analyse whether those would be considered as best practices which should also be

recommended to be as a practice by other banks operating Islamic banking.

It is stated in BNM SGF Principle 7: “There shall be a robust Shariah

compliance function, comprising review and audit functions, supported by risk

management control process and internal research capacity.”

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In BNM SGF, Shariah Review function “...refers to regular assessment on

Shariah compliance in the activities and operations of the IFI by qualified Shariah

officer(s), with the objective of ensuring that the activities and operations carried out

by the IFI do not contravene with the Shariah.”

Shariah Audit according to BNM SGF “... refers to the periodical assessment

conducted from time to time, to provide an independent assessment and objective

assurance designed to add value and improve the degree of compliance in relation to

the IFI’s business operations, with the main objective of ensuring a sound and

effective internal control system for Shariah compliance.”

Whilst, according to BNM SGF Shariah Risk Management is “...a function to

systematically identify, measure, monitor and control of Shariah non-compliance risks

to mitigate any possible of non-compliance events.”

In order to understand further the practice of Shariah Compliance function for

Malaysian Islamic bank, the researcher has chosen Bank Rakyat as the case study for

this research. The reasons why the researcher chooses Bank Kerjasama Rakyat

Malaysia Berhad (afterwards will be referred as “Bank Rakyat”) is because this bank

is regarded as among the most outstanding banks in Malaysian Islamic banking

industry. Bank Rakyat is the largest Islamic cooperation bank in Malaysia and was

awarded with numerous awards including ‘The Most Outstanding Islamic Retail

Banking Award’ for 2012, 2009 and 2007 at Kuala Lumpur Islamic Finance Forum.

Bank Rakyat was established in 1948 as a conventional bank but had transformed

from conventional banking system to a banking system based on Shariah in 2002

(Bank Rakyat Official Website, 2012).

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1.2 PROBLEM STATEMENT

Shariah compliance is perceived as the most significant feature for any Islamic bank

and that characteristic differentiates Islamic banks with those which are not. At early

stage of Islamic banking industry in Malaysia, in order to ensure Shariah compliance

of the bank, generally focus was more given towards the establishment of Shariah

Committee for each Islamic bank. The establishment of Shariah Committe is a

statutory requirement to all banks and takaful operators which offer Islamic banking

and takaful products pursuant to section 3 (5) (b) of the Islamic Banking Act 1983

(IBA 1983) for Islamic banks, section 124 (7) of the Banking and Financial Institution

Act 1989 (BAFIA 1989) for Islamic Banking Scheme Banks, section 8 (3) (a) Takaful

Act 1984 (TA 1984) for Takaful operators and section 16B of the Central Bank of

Malaysia (Amendment) Act 2003 (CBA 2003) for Central Bank of Malaysia (Zulkifli,

2008).

BNM had, in 2004, issued Guidelines and Procedures for Shariah Committee

(afterwards will be referred as “BNM/GPS1”) with the objectives are to set out the

rules, regulations and procedures in the establishment of the Shariah Committee, to

define its role, scope of duties and responsibilities and to define relationship and

working arrangement between the Shariah Committee and the Shariah Advisory

Council of BNM (Zulkifli, 2008). Without neglecting the importance of the

establishment of Shariah Committee as per requirement in the act and the BNM

guideline, it can be concluded from certain literatures which discussed on Shariah

compliance aspect in Islamic banks that mere reliance on Shariah Committee may not

be regarded as sufficient to assure the total Shariah compliance of Islamic banks. It is

important to note that BNM/GPS1 does not provide explicitly the requirement for

4

Islamic financial institutions to establish Shariah Review, Shariah Audit and Shariah

Risk Management.

Although it can be observed in certain literatures which discussed on Shariah

governance or Shariah compliance etc. prior to 2011 on the need to have Shariah

Review, Shariah Audit and Shariah Risk Management functions; it was not until the

issuance of BNM SGF that Shariah Compliance Function which includes Shariah

Review, Shariah Audit and Shariah Risk Management functions are imposed by the

regulator to the Malaysian Islamic financial institutions.

As there was no explicit requirement on the functions, is it that the functions

did totally not exist prior to the issuance of BNM SGF? Are the Malaysian Islamic

bank did not make any own initiative and simply comply only minimum requirements

instructed by the regulator? Should the functions did also exist prior to the issuance of

BNM SGF, how difference is the practices with post issuance of BNM SGF.

It is clearly understood that Shariah Review, Shariah Audit and Shariah Risk

Management functions were required to be established according to BNM SGF.

However, the question is how the Islamic bank implements those functions? Whether

there are certain significant key features which depart the implementation compared to

what are required as per in BNM SGF; and whether those different approaches could

be regarded as best practices which should be recommended to be followed by other

banks.

1.3 OBJECTIVES

The main objectives of the study are to explore how Shariah Compliance Function is

practised in Malaysian Islamic banks and how different are the practices between pre

and post implementation of BNM SGF. It is indirectly to show and highlight the

5

commitment of the bank in enhancing the internal Shariah Compliance Function. In

addition to those, this study attempts to explore the ideal and practical way in

implementing a robust and effective Shariah Compliance Function which in return

may be beneficial to the industry. In consideration of the above, the objectives of this

research are:

i. Shariah Governance Framework for Islamic Financial Institutions

(BNM/RH/GL_012_3) issued by Bank Negara Malaysia (afterwards will

be referred as “BNM SGF”);

ii. Governance Standard for Islamic Financial Institutions (afterwards will be

referred as “GSIFI”) issued by Accounting and Auditing Organisation for

Islamic Financial Institutions (afterwards will be referred as “AAOIFI”);

and

iii. Guiding Principles on Shari’ah Governance Systems for Institutions

Offering Islamic Financial Services issued by Islamic Financial Services

Board in 2009 (afterwards will be referred as “IFSB-10”).

1.4 SCOPES AND LIMITATIONS

Generally, the terminology “Shariah Compliance Function” in this study shall refer to

Shariah Review, Shariah Audit and Shariah Risk Management functions as

highlighted in BNM SGF. This is very important matter to be highlighted as other

literatures may define Shariah Compliance Function differently. In addition to that,

the study shall only focus on the Shariah Review, Shariah Audit and Shariah Risk

Management in Malaysian Islamic Banking and Finance. Hence, the practice of those

(if any) in other industry is excluded in this study. This research will also not cover

the functions of those in Islamic banking and finance industry outside of Malaysia.

6

Shariah Audit which is discussed in the paper is referred to Shariah internal Audit,

rather than external Audit. On the other hand, Shariah Review will cover only Shariah

post-transaction review.

This study will be more on overview of the key significant features

implementation approaches rather than be too specific on each and every paragraph as

stipulated in BNM SGF. As only Bank Rakyat is taken as case study for this research,

thus it shall not be expected for this paper to highlight the practices of the functions in

other Islamic banks. The analysis on those functions will be based on feedback from

interview conducted with the respondents who are relevant stakeholders in the banks.

The researcher will not however conduct further checking and vetting private &

confidential documents which may cause inconvenience to the respondents. This

study shall also not be understood by any means whatsoever as auditing or checking

whether the practice of those functions in Bank Rakyat comply with BNM

requirements, as that is not the purpose of the researcher when conducting this study.

1.5 RESEARCH METHODOLOGY

This study is a qualitative research. Qualitative research is designed to understand

how and why things happen (Cooper and Schindler, 2011:160). It includes “an array

of interpretive techniques which seek to describe, decode, translate, and otherwise

come to terms with the meaning, not the frequency, of certain more or less naturally

occurring phenomena in the social world” (Cooper and Schindler, 2011: 162). The

researcher chooses qualitative research for this study instead of quantitative research

is because the researcher intends to explore the answer for “how” questions rather

than “how many” questions (Silverman, 2010: 11). Furthermore, the focus of the

7

study is more towards gaining in-depth understanding (Cooper and Schindler, 2011:

163) and not to make standardized and systematic comparisons and in accounting for

variance (Silverman, 2010: 13).

The researcher considers this study as an exploratory research which involves

“an attempt to determine whether or not a phenomenon exists” (Dane, 1990: 5).

Exploratory research refers to the investigation into a problem or situation which

provides insights to the researcher (Business Dictionary Website, 2012). The research

is meant to provide details where a small amount of information exists (Business

Dictionary Website, 2012). The researcher believes exploratory research is the most

appropriate form for this study as it aims to add understanding on the subject matter

which then can open for new avenues for research and it is not intended to test a

particular theory (Dane, 1990: 4). The study is not intended to investigate further the

phenomenon by defining exactly what it is meant as per description research, nor it is

to identify relationships that enable speculating about one thing by knowing some

other thing as per prediction research or to determine whether or not an explanation (a

cause-relationship) is valid as per explanation research (Dane, 1990: 6-7). The main

references for this study are:

i. Shariah Governance Framework for Islamic Financial Institutions

(BNM/RH/GL_012_3) issued by Bank Negara Malaysia (afterwards will

be referred as “BNM SGF”);

ii. Governance Standard for Islamic Financial Institutions (afterwards will be

referred as “GSIFI”) issued by Accounting and Auditing Organisation for

Islamic Financial Institutions (afterwards will be referred as “AAOIFI”);

and

8

iii. Guiding Principles on Shari’ah Governance Systems for Institutions

Offering Islamic Financial Services issued by Islamic Financial Services

Board in 2009 (afterwards will be referred as “IFSB-10”).

iv. Nevertheless, other literatures related to Shariah governance, Shariah

Compliance Function, Shariah Review, Shariah Audit and Shariah Risk

Management are also referred for this study.

Semi-structured interview is chosen by the researcher in order to extract more

data related to the study and to have a better insight in the practical aspect of the

subject matter. This is very important as the researcher is of the opinion that relying

too much on theoretical aspect without concerning on the practice may lead to notion

highlighted on the subject matter is considered as not practical which defeats the

purpose of conducting this study. Furthermore, this study is focusing more on the

practice of specific institutions which is believed to be vital to gain in-depth

understanding on the practical aspect of the subject matter. Semi-structured interview

refers to the interview whereby “the interviewer poses a few predetermined questions

but has considerable flexibility concerning follow-up questions” (Dane, 1990: 129).

Semi-structured interview is opted for this study is due to its flexibility which enable

the researcher to explore more fully the opinions of respondents which may result in

more and varied detail of the total collection of responses (Dane, 1990: 129). In this

study, the interview may be conducted in the following styles:

i. Face-to-face interview;

ii. Teleconference; and/or

iii. Email correspondence.

Face-to-face interview is the first option which is preferred by the researcher

because it may ease the process of getting clear understanding on the subject matter.

9

As the interview is semi-structured, it is easier for the researcher to either clarify

responses or ask for clarification for some of the items on the questionnaire (SAGE

Research Method Website, 2012). Teleconference may also be used by the researcher

to smoothen the process of mining the information should face-to-face interview for

certain respondent could not be conducted or any other reason considered applicable

to the researcher during the tenure of research. Email correspondence may also be

considered by the researcher depending on the situation either due to time constraints

of the respondents or due to it is more preferred by the respondents or any other

situation which deemed necessary or suitable during the research duration. For this

study, the respondents which will be selected for the interview are bank officers which

are related to Shariah Review, Shariah Audit and Shariah Risk Managemet functions

in Bank Rakyat.

1.6 CHAPTERISATION

Shariah compliance function is one of the instrumental aspects in Shariah governance

of Malaysian Islamic banks. The function as explained in BNM SGF comprised of

Shariah Review and Audit functions, supported by Shariah Risk Management control

process. This study attempts to explore the existence and the manner it was

implemented pre and post the issuance of BNM SGF in Bank Rakyat.

The first chapter of the paper provides general introduction and method of the

research. The chapter explains the problem statement, objectives, scopes and

limitations and significance of the study. The methodology of the study is discussed in

detail in this chapter.

The second chapter is on the literature review conducted on the subject matter

of the study. The main pillar of the study is BNM SGF supported by other main

10

references i.e. GSIFI issued by AAOIFI and IFSB-10. Other literatures related to

Shariah governance, Shariah Review, Shariah Audit and Shariah are also discussed in

the chapter. The literatures are categorized whether those were prior to the issuance or

upon the issuance of BNM SGF. The purpose of that kind of categorization is for the

readers of the paper to observe coherently the differences of the discussion on the

subject matter between pre and post issuance of BNM SGF.

Subsequently, Chapter Three discusses on the general overview of Shariah

governance. However, it shall not be understood by any means that the paper will

discuss in detail on the whole Shariah governance in this paper as this study focuses

on Shariah compliance function which is only a part of Shariah governance of the

Islamic financial institutions. The purpose of the discussion in this chapter is to give a

general insight on Shariah governance prior to the discussion in detail on the real

subject matter of the study in the following chapters.

The following chapter i.e. Chapter Four explores on Shariah Compliance

Function which is a very important part of the Shariah Governance in an Islamic bank.

The discussion in this chapter will focus mainly on key features of Shariah Review,

Shariah Audit and Shariah Risk Management as stated in BNM SGF. Besides, certain

important information on the functions as stated IFSB-10 and GSIFI may also be

highlighted. This chapter is also intended to clarify certain matters on the differences

of those functions and to clarify on the subject matters to avoid confusion on the

subject matter based on BNM SGF, IFSB-10 and GSIFI.

Consequently, Chapter Five will elaborate on the implementation of Shariah

Compliance Function in Bank Rakyat. This chapter discusses on the results of the

researcher's interview with selected officers related with the functions of Shariah

Review, Shariah Audit and Shariah Risk Management.

11

Finally, the last chapter will cover overall findings of the study and its

conclusion. The discussion on the best practices of the implementation approach of

Shariah Compliance Function will also be discussed in this chapter. The discussion on

the best practice is expected to derive recommendations which hopefully be beneficial

for the industry in the process of strengthening Shariah Compliance Function in

Islamic financial institutions.