Improvements in the Application of the Tawarruq Munazzam Contract in Malaysian Islamic Banking: An Analysis from a Shariah Perspective

Abstract

This paper aims to examine the measures taken by selected banks in Malaysia to enhance the implementation of tawarruq munazzam contracts. As a qualitative study, the researcher gathered data through library research and empirical studies. The library research involved analyzing books, articles, and statutes, while the field studies consisted of unstructured interviews with eight participants, including officers and Shariah committees of Islamic Finance Institutions (IFI). The sample group was selected using the purposive sampling method. Consequently, the researcher identified several themes from the interview data, which were subsequently analyzed. Tawarruq munazzam was chosen as a case study due to its prevalence as the most popular financial instrument among Islamic banks in Malaysia. The research findings revealed nine issues related to the tawarruq munazzam contract. Furthermore, the study highlighted the lack of uniformity among the five surveyed banks in terms of their efforts to improve the practice of tawarruq munazzam contracts. Additionally, one unresolved issue identified by the study pertained to the inclusion of wakalah elements. Notably, the study found that one of the banks exhibited the highest level of improvement in the practice of tawarruq munazzam, addressing eight out of the nine issues raised.