IV. Recommendations As has been presented in the paper, several diverse factors contribute to the lack of PLS modes of financing. However a commonality amongst all factors root from information asymmetry. For this reason, it is only necessary that tackling the core issue must be addressed. Although the literature provides vast alternatives for dealing with specific obstacles, it is essential that major restructuring and reform be conducted to enhance the weak environment to facilitate PLS modes of financing. Implementation of control and regulation mechanisms One possible solution that could be implemented is that of reforming, activating and ensuring effective implementation of regulatory policies applying regulatory authority to ensure transparency. Both internal and external control mechanisms are needed. Such control and monitoring is a form of authority. Redefining measures need to be taken bearing in mind the distinction between management and control, so as to optimize performance and efficacy. Active board of directors, bylaws and governance strategies implemented in firms allows shareholders to monitor managerial behaviour to ensure it is in line with their interests. Furthermore, such a mechanism needs cooperation to ensure success. The free flow of information and communication and efficient decision-making are integral components needed to ensure continuous monitoring and control systems are in place. Moreover, as previously mentioned, ensuring that reward policies and incentives are available to avoid information asymmetry can also be adopted. The below diagram illustrates the distinction between management and control in terms of the interrelation of reward, risk, responsibility and authority. Through ensuring a bala... ... middle of paper ... ...1999), “Islamic Business Contracts, Agency Problem and the Theory of the Islamic Firm," International Journal of Islamic Financial Services Vol. 1 No.2, pp. 12-28. Siddiqi, M. (1983), “Banking Without Interest”, Research in Islamic Economics, Volume 1, Number 2. Siddiqi, M (1985) Partnership and Profit-sharing in Islamic Law Islamic Foundation The Holy Quran. n.d. p. (2:283) Ul Haque, N. and Mirakhor, A. (1986), “Optimal Profit-sharing Contracts and Investment in an interest-free Islamic Economy”, IMF Working Paper. Visser, H. (2009), Islamic finance. Cheltenham, U.K.: Edward Elgar. Vogel, F.E. Hayes, S.L. (1998), “Islamic Law and Finance: Religion, Risk and Return”. 1st Edition. Massachusetts. Kluwer Law International. Warde, I. (1999), The Revitalization of Islamic Profit-and-loss Sharing. [Report] Cambridge: Center for Middle Eastern Studies, Harvard University.
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Corporate gorverance as a system are directed and controlld by companies. Initially, their board of directors should take responsible for the gorverance of companies, which include setting strategic aims of companies , guarantee an effective leadership, supervising the proformance of business management and reporting on it to shareholders. The board's action should comply with the law, regulations and shareholders. In addition, the shareholders also play an important role in gorverance and they have right to decide who can be employed as the companies' directors and auditors to provide good governance structure for them. Therefore, corporate goverance can be regarded as what the board of a company does and how it sets the values of the company.
This report gives the brief overview of the concept of corporate governance, its evolution and its significance in the corporate sector. The report highlights various key issues and concerns that are faced by the organizations while effectively implementing and promoting Corporate Governance.
NY 1994. 3. Choueiri, Youssef M. Islamic Fundamentalism. Pinter Press. London and Washington, 1990. 4.
The modern Islamic Finance industry is young, its timeline begin only a few decades ago. However, islamic finance is involving rapidly and continues to expend to serve a growing population of muslims as well as conventional.
Gulevich, Tanya, and Frederick S. Colby. Understanding Islam and Muslim Traditions. Detriot, Michigan: Omnigraphics, Inc., 2004. Print.
Organizations that only have top management as the board members are more susceptible to accounting malpractices. Members of the board should preferably own shares in the company to ensure diligence when it comes to the interests of the company. Apart from the Board of Governors, there should also be an audit committee in place to oversee the financial dealings of the bank. Members of the board and the audit committee should have basic financial knowledge. Some of the members should also be experts in finances so that they can detect any anomaly that may take place in terms of financial reporting. An overhaul of the regulatory framework is required to empower authorities to intervene immediately, and make improvements. New technology is required. Manual antiquated processes should be eliminated because this causes greater human error and poor
G. Esposito, John L (2002) Islam; What Everyone Should Know. New York. Oxford University Press Inc.
Effective control process in an organization would help in gathering information about the process and the employees, this can further help the management whilst taking important decisions in terms of establishing standards to meet standards, measuring the actual performance, as well as comparing performance with the standards. It can further help the companies in achieving their optimum goals so that they can take corrective actions as and when required. The process controls in place and guide and provide the company with the required regulations of the company’s activities. Which can lead to the performance of the company, hence it will also help the organization in terms of monitoring and responding.
Lastly the challenges faced by the Islamic banking is the lack of unity in giving Shariah’s view. Therefor, it gives problem to the agencies as there are different methodologies that are being proposed when elaborating the law. In order to counter this challenges, agencies need to take initiatives of choosing the view which is parallel or nearly parallel with what was underlined by the Al-Quran and As- Sunnah.
Overall, the company is having ineffective controls regarding different departments and in the whole organization. An effective internal audit department should be established within the organization which should test the effectiveness of these controls on regular basis and make it sure that all controls are working effectively and efficiently with the different departments of the organization. Also the Internal auditor should implement the most effective processes and measures to prevent and detect the fraud, corruption and non compliance with the laws and regulations in the organization. Establishment of internal audit committee would be helpful in this regard which comprises of executive and non executive directors.