BY ZALEHA ZAIN. ISLAMIC FINANCIAL SERVICE ACT 2013 (IFSA 2013) CRITICISM AND ITS IMPACTS. The IFSA 2013 or Islamic Financial Service Act 2013 came into effect on 31 June 2013 after it was approved by a Parliament. Basically The it repeals the Islamic Banking Act 1983 (BAFIA) and the Takaful Act 1984 (TA) and combines the Islamic financial and takaful services under the aforementioned acts in a similar fashion. Means that those two Acts are no longer use nowadays. FEATURES OF IFSA 2013: to focus on Shari’ah compliance and governance in the Islamic financial sector. To provides for a comprehensive legal framework that is fully consistent with Shari’ah in all aspects of regulation and supervision, from licensing to the winding up of an institution. Promoting financial stability and protect the rights and interests of consumers of financial services and products based on Shari’ah compliance.

2. 
The IFSA 2013 or Islamic Financial Service
Act 2013 came into effect on 31 June
2013 after it was approved by a
Parliament. Basically The it repeals the
Islamic Banking Act 1983 (BAFIA) and the
Takaful Act 1984 (TA) and combines the
Islamic financial and takaful services
under the aforementioned acts in a
similar fashion. Means that those two
Acts are no longer use nowadays.

3. to focus on Shari’ah compliance and
governance in the Islamic financial sector.
 To provides for a comprehensive legal
framework that is fully consistent with
Shari’ah in all aspects of regulation and
supervision, from licensing to the winding up
of an institution.
 Promoting financial stability and protect
the rights and interests of consumers of
financial services and products based on
Shari’ah compliance.


4. > has REGULATORY and SUPERVISORY
oversight power under IFSA 2013.
Giving that BNM has power to fulfill its
broad mandate within a more complex
and interconnected environment
together with the regional and
international nature of financial
developments.

5. 
an increased focus on preemptive
measures to address issues of concern
within financial institutions that may
affect the interests of depositors and
policyholders, and the effective and
efficient functioning of financial
intermediation.

6. 
Power to safeguard financial stability
power to specify standards on Shari’ah
matters, transparent assessment criteria
for authorizing institutions to carry on
regulated financial business, and for
shareholder suitability

7. IMPACT OF IFSA
2013 ON
TAKAFUL AND
RETAKAFUL

8. 
The IFSA requires a Takaful operator (other than a
professional reTakaful operator) with a composite license
to separate its Family business from its General Takaful
business. The firm is given a grace period of 5 years to split
its business into separate entities. The intention of the
regulator is to expand the growth of General Takaful
business. Most of the composite Takaful operators are
currently focusing on Family Takaful and the growth on the
General side is lagging behind. As a result of this, several
existing composite operators may consider giving up their
General license and new players will enter the market.
However, the question arise whether this will really lead to
an increase growth on the General side? Takaful
operators currently write little commercial and industrial
risks, and it is expected that some of the new players may
focus on such business.

9. 
The IFSA 2013 requires Takaful operators to
be established as public companies.
However, given the nature of mutual
assistance in Takaful, it will be more
appropriate for the firm to be set up as cooperatives or mutuals. By being a public
company, Takaful firms will become a
wholly commercial venture. Whilst this is not
prohibited under Shariah, it will be better if
the Takaful companies have also the option
to set themselves up as co-operatives or
mutuals.

10. 
IFSA 2013 has incorporated stricter Shariah
requirements as they are the foundation of
Takaful. At the same time, these requirements
will add more strain on Takaful and reTakaful
operators. All the efforts in ensuring Shariah
compliance increase the firm’s operational
costs. Thus, in principle, Takaful and reTakaful
firm should be able to charge higher prices
than their conventional counterparts. However,
in reality this is often not possible, and by this, it
makes it more difficult for the firms to achieve
the same returns as conventional insurers.

11. 
The IFSA has also implemented additional
prudential requirements on Takaful operators
with regards to maintenance of various funds,
assets and risk management among others. It
also makes the provision of Qard (interest-free
loan) compulsory in case of a deficit in the risk
fund. This is important to Takaful and reTakaful
operators because it has an effect on their
reserves requirements. In principle, Takaful is
meant to be a program of mutual assistance
between participants. With the requirement of
a compulsory Qard, Takaful becomes a risk
transfer mechanism between participants and
operators just like conventional insurance

12. THANK YOU