The Need of Shariah Governance for Small and Medium Enterprise (SME): A Literature Review

Abd Hakim  Abd Rasid; Mat Noor Mat Zain; Salmy Edawati Yaacob

Shariah Governance was introduced for islamic financial institutions on 2010 through Shariah Governance Framework 2010. Starting from that, other financial institutions including takaful, ar-Rahnu and cooperative started adapting the SGF 2010 to create shariah compliance economic system. Small and Medium Enterprises (SME) also contributing significant role in Malaysia economy which shows that these enterprises also need to adapt the SGF 2010. The objective of this paper is to review past literatures related to shariah governance and the need of shariah governance implementation in Malaysian SME thus observe the need of shariah governance for SME. The methodology of this paper is qualitative by using contents analysis method and the data are analysed descriptively. The outcome of the literature review done shows that shariah governance complete the existing corporate governance which ensures all transactions and business operations are done in shariah compliance manner. It also increases an institution’s credibility and also public’s confidence on its shariah compliance status. This paper shows the importance of shariah governance implementation in SME enterprises. Therefore, further research needs to be conducted on what shariah governance model that are suitable with size, nature of business and the ability of SME enterprises to implement it.

Adan, M., Izzuan Hussain, S., & Samsudin, B. H. (2020). Understanding the Economic Linkages among Small and Medium Enterprises, Economic Growth, and Employees in Malaysia. Asian Economic and Financial Review, 10(11), 1309–1320.
https://doi.org/10.18488/journal.aefr.2020.1011.1309.1320
Haqqi, A. R. A. (2014). Shariah Governance in Islamic Financial Institutions: An Appraisal, 2, 112-133
Muneeza, A. (2014). Shari’ah Governance Applicable to Islamic Banks in Malaysia: Effect of Islamic Financial Services Act 2013. The Developing Role of Islamic Banking and Finance: From Local to Global Perspectives, 31–44. https://doi.org/10.1108/s1569-3759(2014)0000095010
Saleh, A. S., & Ndubisi, N. O. (2006). SME development in Malaysia: Domestic and global challenges. In C. Harvie, & B-C. Lee (Eds.), Small and Medium Sized Enterprises in East Asia: Sectoral and Regional Dimensions (pp. 272 - 297). Edward Elgar Publishing.
Hasan, A. N., Abdul-Rahman, A., & Yazid, Z. (2020). Shariah governance practices at Islamic fund management companies. Journal of Islamic Accounting and Business Research, 11(2), 309–325. https://doi.org/10.1108/jiabr-03-2017-0045
Shah, A., & Sharif, D. (2018). KEPATUHAN SYARIAH DALAM TADBIR URUS AR-RAHNU. Journal of Muwafaqat, 1(2), 37–57.
Surkery, A. S., & Yaacob, S. E. (2019). Shariah Cooperative Concept: A Literature Review: Konsep Koperasi Patuh Syariah: Satu Tinjauan Literatur. Al-Qanatir: International Journal of Islamic Studies, 15(1), 1–11.
Bank Negara Malaysia. (2013). Circular on New Definition of Small and Medium Enterprises (SMEs). Development Finance and Enterprise Department, Bank Negara Malaysia.
Bank Negara Malaysia. (2010). Shariah Governance Framework 2010.
Bank Negara Malaysia. (2019). Shariah Governance Policy Document 2019.
Khor, C. (2017). Newspaper Report the Edge Markets:
https://www.theedgemarkets.com/article/issues-corporate-governance-practices-smes
Whah, C. Y., & Shiang, L. E. (2018). Policies and Performance of SMEs in Malaysia. Southeast Asian Economies, 35(3), 470–487. https://doi.org/10.1355/ae35-3i
Hilmy, H. M. A., & Hassan, R. (2019). Shariah Governance Structure of Islamic Financial Institutions in Sri Lanka. International Journal of Management and Applied Research, 6(4), 245–258. https://doi.org/10.18646/2056.64.19-018
IFSB-10. (2009). Guiding Principles on Shariah Governance Systems for Institutions Offering Islamic Financial Services.
https://www.ifsb.org/download.php?id=4359&lang=English&pg=/published.php
Muhammad, M., & Ahmed, M. U. (2022). Islamic Financial System Principles & Operations (2nd ed.). International Shariah Research Academy for Islamic Finance (ISRA).
Febianto, I. (2009). Shariah Compliant Structure of Business Entities. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1672350
Abor, J., & Biekpe, N. (2007). Small Business Reliance on Bank Financing in Ghana. Emerging Markets Finance and Trade, 43(4), 93–102. https://doi.org/10.2753/ree1540-496x430405
Abor, J., & Adjasi, C. K. (2007). Corporate governance and the small and medium enterprises sector: theory and implications. Corporate Governance: The International Journal of Business in Society, 7(2), 111–122. https://doi.org/10.1108/14720700710739769
Ahmad, M. R., & Al-Aidaros, A. H. (2015). The Need of Independent Shariah Members in Islamic Cooperative Banks: An Empirical Study of Professional Accountants in Malaysia. International Review of Management and Business Research, 4(1).
Itam, M. I., Hasan, R. bt, & Alhabshi, S. M. (2016). Shariah Governance Framework For Islamic Co-Operatives As An Integral Social Insitution In Malaysia. Intellectual Discourse, 24.
Kasim, N., Htay, S. N. N., & Salman, S. A. (2013). Comparative Analysis on AAOIFI, IFSB and BNM Shari’ah Governance Faculty of Accountancy. International Journal of Business and Social Science, 4(15): 220-227
Kasim, N., Htay, S. N. N., & Salman, S. A. (2013). Conceptual Framework for Shari’ah Corporate Governance with Special Focus on Islamic Capital Market in Malaysia. International Journal of Trade, Economics and Finance, 336–339. https://doi.org/10.7763/ijtef.2013.v4.312
Kasim, N., Htay, S. N. N., & Salman, S. A. (2013). Shariah governance for Islamic capital market. International Journal of Education and Research, Vol. 1: 1-14.
Bahari, N. F., & Baharudin, N. A. (2016). Shariah Governance Framework: The Roles Of Shariah Review And Shariah Auditing. Proceeding of the 3rd International Conference on Management & Muamalah.
Noor, N. L. M., Noordin, N. (2016). A Halal Governance Structure: Towards a Halal Certification Market. In: Ab. Manan, S., Abd Rahman, F., Sahri, M. (eds) Contemporary Issues and Development in the Global Halal Industry. Springer, Singapore. https://doi.org/10.1007/978-981-10-1452-9_14
Mahzan, N., & Yan, C. M. (2014). Harnessing the Benefits of Corporate Governance and Internal Audit: Advice to SME. Procedia - Social and Behavioral Sciences, 115, 156–165. https://doi.org/10.1016/j.sbspro.2014.02.424
Grassa, R. (2013). Shari?ah Governance System in Islamic Financial Institutions: New Issues and Challenges. Arab Law Quarterly, 27(2), 171–187. https://doi.org/10.1163/15730255-12341254
Grassa, R. (2013). Shariah Supervisory System In Islamic Financial Institutions New Issues and Challenges: A Comparative Analysis between Southeast Asia Models And GCC Models. Humanomics. Vol. 29(4): 333-348.
Hassan, R., Samad, R. R., & Shafii, Z. (2018). SHARI’AH GOVERNANCE PRACTICES IN CREDIT COOPERATIVES IN MALAYSIA. Al-Shajarah: Journal of the International Institute of Islamic Thought and Civilization (ISTAC), 89–109.
Hameed, S. (2000). Nurtured by “Kufr: The Western Philosophical Assumptions Underlying Conventional (Anglo-American) Accounting. International Journal of Islamic Financial Service. 2(2):1-31.
Htay, S. N., & Salman, S. A. (2013). Corporate Governance: A Case Study of SMEs in Malaysia. Middle-East Journal of Scientific Research. 18(2): 243-252.
Ab. Nasir, W. A. S., Hassan, R., & Tijani, I. M. (2020). Malaysian’s Government Linked Investment Companies: Is There a Need for Shariah Governance Framework? Journal of Islam in Asia (E-ISSN 2289–8077), 17(2), 198–222. https://doi.org/10.31436/jia.v17i2.961
Sori, M. Z., Mohamad, S., & Shah, M. E. (2015). Shariah Governance Practices in Malaysian Islamic Financial Institutions. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2579174
Wardayati, S. M. (2011). IMPLIKASI SHARIAH GOVERNANCE TERHADAP REPUTASI DAN KEPERCAYAAN BANK SYARIAH. Walisongo: Jurnal Penelitian Sosial Keagamaan, 19(1), 1. https://doi.org/10.21580/ws.19.1.210
Zain, M. S. N., & Shafii, Z. (2018). The Impact of Shariah Governance to Financial And Non-Financial Performance In Islamic Financial Institutions (Ifis): A Literature Survey. International Journal of Islamic Business. 3(2).
Minhas, I. H. (2012). Shari'ah Governance Model (SGM) and Its Four Basic Pillars (April 18, 2012). Islamic Finance News Malaysia Published by Red Money Publication, Available at SSRN: https://ssrn.com/abstract=2153106
Miskam, S., & Nasrul, M. A. (2013). Shariah Governance in Islamic Finance: The Effects of The Islamic Financial Services Act 2013. Conference: World Conference on Integration of Knowledge 2013, At Malaysia
Punyaratabandhu, S. (2004). Commitment to Good Governance, Development and Poverty Reduction: Methodological Issues in The Evaluation of Progress at The National And Local Levels. CDP Background Papers 004, United Nations, Department of Economics and Social Affairs.
Suruhanjaya Koperasi Malaysia (SKM). (2015). Garis Panduan 28 (GP28): Garis Panduan Tadbir Urus Shariah.
Sekuriti, S. (2007). Guidelines on Islamic Fund Management.
Shafii, Z., Obaidullah, M., & Samad, R. R. (2017). Developing a Model for Corporate Governance and Conflict of Interest Deterrence in Shari’ahbased Cooperatives. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3303692
Hasan, Z. (2011). A survey on Shari’ah governance practices in Malaysia, GCC countries and the UK. International Journal of Islamic and Middle Eastern Finance and Management, 4(1), 30–51. https://doi.org/10.1108/17538391111122195
Hasan, Z. (2012). Shari'ah Governance in Islamic Banks. Edinburgh University Press: Edinburgh.

In-Text Citation: (Rasid et al., 2022)
To Cite this Article: Rasid, A. H. A., Zain, M. N. M., & Yaacob, S. E. (2022). The Need of Shariah Governance for Small and Medium Enterprise (SME): A Literature Review. International Journal of Academic Research in Economics and Management and Sciences, 11(3), 76–90.

Copyright: © 2022 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode

International Journal of Academic Research in Economics and Management Sciences

Open Access Journal

The Need of Shariah Governance for Small and Medium Enterprise (SME): A Literature Review

Abd Hakim Abd Rasid, Mat Noor Mat Zain, Salmy Edawati Yaacob

Further Information

Our Journals

Get intouch with us