Regulatory Requirements for Establishment and Operation of Islamic Banking System: A Proposed Model with Primary Requirements
Purpose: The purpose of the study is to critically evaluate the regulatory and supervision of Nigerian Islamic banking system in terms of its establishment and operation. The study also proposes a model (primary requirements) as a way forward for the development and for the smooth running of the system.
Methodology: The study employs qualitative approach making use of both the in-depth field interview with regulatory officers, practitioners, academicians who are directly involved in the operations of Islamic banking system in two countries Malaysia and Nigeria. And secondary source inform of documentary review is also employed.
Findings: The study reveals that development of Islamic banking system in Nigeria is facing the following constraints: 1. Lack of government support, 2. Misconception about the concept of Islamic banking system, 3. Religion and ethnic sentiments. Although, a lot has been done by the CBN as the regulator from the findings of the study, but the desired results are yet to be seen. Finally, the study proposed a model of Islamic banking system in terms of requirements by a nation for the establishment and smooth running of the system.
Practical Implication/ Value of the Study: The study will have policy implication to the CBN and other stakeholders in the area of Islamic banking system. Findings of this study will be a source of reference for Nigeria and other countries in formulating the similar concept of Islamic banking system because it provides gap which needs to be filled in order to make the system a success. The research will also have policy implications to international organizations such as IDB, World Bank, UN and IMF that have been championing the course of financial inclusion.
Keywords: Regulatory, Establishment and operation, Islamic banking system, Proposed model, Primary requirements
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