This course provides an understanding of the legal framework governing Islamic banking, takaful, and capital market in Malaysia. The course aims to enable students to explain the legal framework, describe various Islamic financial products and their relation to legal practice, and apply legal principles to different scenarios in Islamic banking. It covers topics such as the regulatory framework, relevant statutes and case law, legal documentation for products, and jurisdiction of courts over Islamic finance cases. Students will be assessed through coursework, tests, assignments, group presentations, and a final examination.

1. UNIVERSITI TEKNOLOGI MARA
COURSE INFORMATION
Confidential
Code : ISB658
Course : Islamic Financial Legal Framework
Level : Degree
Credit Unit : 4
Contact Hours : 4
Part : 5
Course Status : Core
Prerequisite : None
Course Outcomes
At the end of the course, students should be able to :
1. explain the legal framework concerning Islamic banking and finance. (LO1,6)
2. describe the modus operandi and various Islamic financial products in relation
to the current legal practice. (LO6)
3. apply the principles of law to to different scenarios of Islamic banking issues.
(LO7)
Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA

2. Course Description
This course provides an understanding of the legal framework of Islamic banking
and finance. Topics covered include the laws and regulations which govern
Islamic banking business, Takaful business as well as Islamic capital market.
Syllabus Content
1.0 Framework of the Malaysian Financial System
1.1 The Malaysian Financial System
1.2 Regulatory Framework of the Malaysian Financial System
1.3 The Malaysian Islamic Financial System
1.4 Master Plan for Islamic Banking and Takaful
2.0 Legal Framework of the Malaysian Islamic Financial System
2.1 The position of Islamic law in the Federal Constitution.
2.2 The Laws and Regulations which Govern Islamic Banking and Finance
2.3 Shari’ah Advisory Council (SAC) and Shari’ah Advisory Body (SAB)
2.4 The Statutes which Relevant to Islamic Banking and Finance
3.0 Legal Framework of Islamic Banking
3.1 Islamic Banking Act 1983 (IBA)
3.2 Banking and Financial Institution Act 1989 (BAFIA)
3.3 Central of Banking Act 2009 (CBA)
4.0 Legal Framework of Takaful
4.1 Introduction to Takaful
4.2 Development of Takaful operations
4.3 Statute and Guideline governing Takaful operation
4.4 Takaful Business
5.0 Legal Framework of Islamic Capital Market
5.1 Development of Islamic Capital Market
5.2 Islamic Capital Market Products
5.3 Statutes and Guidelines governing Islamic Capital Market
6.0 Legal Documentation for Islamic Banking and Finance
6.1 Legal Documentation for Islamic Banking Products
6.2 Legal Documentation for Islamic Private Debt Securities
Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA

3. 7.0 Court’s Jurisdiction over Islamic Banking and Finance Cases
7.1 Jurisdiction of the Civil Court
7.2 Jurisdiction of the Shari’ah Court
7.3 Discussion on some Islamic Banking Cases
8.0 Legal Aspects of e-Islamic Banking
8.1 Definition of e-Banking
8.2 Malaysia’s Legal Framework on e-Banking
8.3 Legality of e-Islamic Banking under the Shari’ah
8.4 Legal Issues on e-Islamic Baking
Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA

4. Teaching Methodology
Lectures
Active learning
Group Project
Assessment
Course Work
Tests
Assignment
Group Presentation
30 %
10 %
10 %
Final Examination 50 %
Recommended Text
Muhamad Rahimi Osman. (2009) Islamic Financial Legal Framework, UPENA, Shah
Alam
References
1. Nik Norzrul Thani, Legal Aspects of the Malaysian Financial System, Sweet & Maxwell
Asia, Petaling Jaya, 2001.
2. Nik Norzrul Thani et. al., Law and Practice of Islamic Banking and Finance, Sweet &
Maxwell Asia, Petaling Jaya, 2003.
3. Mohd Daud Bakar, “Development of a Supportive and Effective Legal Framework for the
Islamic Financial Services Industry” paper presented at the International Seminar on
Challenges Facing the Islamic Financial Services Industry, Bali, Jakarta, 1-2 April 2004.
4. Mohd Daud Bakar, “ The Shari’a Supervisory Board and Issues of Shari’a Rulings and
Their Harmonisation in Islamic Banking and Finance”, in Islamic Finance: Innovation and
Growth, Euromoney Books/AAOIFI, pp. 74 – 89.
5. Engku Rabiah Adawiah, “Islamic Law Compliance Issues in Sale-Based Financing
Structures As Practiced in Malaysia” [2003] 3 MLJ p. lviii.
6. Mohamed Ismail Mohamed Shariff, “Salient Features of Islamic banking Act 1983 &
Banking and Financial Institutions Act 1989”, paper presented at Seminar on Shariah
and Legal Aspects of Islamic Banking Practice, 29-30 May 1996.
7. Ahmad Ibrahim, “Legal Framework of Islamic Banking”, Jurnal Undang-undang IKIM, vol.
1, No. 1, July-Dec. 1997, pp. 1-29.
8. Halsbury’s Laws of Malaysia, Vol. 14, Malayan Law Journal Sdn Bhd, 2002, pp. 248-
311.
9. Mohd Ma’sum Billah, Principles & Practices of Takaful and Insurance Compared, IIUM
Press, Kuala Lumpur, 2001.
Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA

5. 10. Resolutions of the Securities Commission Syariah Advisory Council, Securities
Commission, Kuala Lumpur, 2002.
11. Norhashimah Mohd Yasin, “Islamic Banking: Case Commentaries Involving al-Bay’
Bithamani Ajil”, [1997] 3 MLJ, p. cxcii.
12. Hurriyah El-Islamy, E-Business An Islamic Perspective, A. S. Noordeen, K. Lumpur,
2002.
13. Mohd Illiayas, “Islamic/Interest-Free Banking in Malaysia: Some Legal Considerations”,
[1995] 3 MLJ p. cxlix.
14. Samsar Kamar Ab. Latif, “ Legal Aspects of Interest-Free Banking in Malaysia”, [1997] 2
MLJ, p. xc.
15. Nik Ramlah Mahmood, “Regulatory Framework and the Role of the Securities
Commission in Developing the Islamic Capital Market”, paper presented in National
Conference on Islamic Banking and Investment – The Challenges and Way Forward” 19
November 1996.
16. Muhamad Rahimi Osman, “Development of the Legal and Shari’ah Frameworks for the
Islamic Banking System in Malaysia”, Journal International Business and
Entrepreneurship, Vol. 12, No. 2, Dec. 2006, pp. 65 – 82.
Statutes:
1. Federal Constitution
2. Islamic Banking Act 1983
3. Banking and Financial Institution Act 1989
4. Central of Banking Act 2009
5. Takaful Act 1984
6. Securities Commission Act 1993
7. Offshore Banking Act 1990
Cases:
1. Bank Islam Malaysia Bhd. v. Lim Kok Hoe & Anor. and Other Appeals [2009] CLJ JT
(4)
2. Arab-Malaysian Finance Bhd. v. Taman Ihsan Jaya Sdn. Bhd. & Ors [2008] 5 MLJ
631
3. Malayan Banking Bhd. v. Ya’kup Oje & Anor. [2007] 5 CLJ 311
4. Affin Bank Bhd v. Zulkifli Abdullah [2006] 1 CLJ 438 HC
5. Bank Kerjasama Rakyat Malaysia Bhd v. Emcee Corparation Sdn Bhd [2003] 1 CLJ
625 (CA)
6. Dato Nik Mahmud Bin Daud v. Bank Islam Malaysia Berhad [1996] 4 MLJ 295 ;
[1996] 1 CLJ 576.
Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA

6. Fakulti Pengurusan Perniagaan Tahun semakan: 2010
Ijazah Sarjana Muda Pentadbiran Perniagaan (Kepujian) Perbankan Islam
© Hak Cipta Universiti Teknologi MARA
7. Bank Islam Malaysia Berhad v. Adnan Bin Omar [1994] 3 CLJ 735 ; [1994] 3 AMR
44.
8. Bank Islam Malaysia Berhad v. Tinta Press Sdn. Bhd [1986] MLJ 256 ; [1987] 1 CLJ
474.