Towards restructuring the legal framework for payment system in international Islamic trade finance

Purpose – The purpose of this paper is to examine the current legal framework for payment system in international Islamic trade finance vis-à-vis the new regime introduced by the Uniform Customs and Practice for Documentary Credits (UCP) 600 as well as the Shari'ah Standard on Documentary Credi...

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Main Author:	Oseni, Umar Aimhanosi
Format:	Article
Language:	English
Published:	Emerald Group Publishing 2013
Subjects:	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects
Online Access:	http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/1/Towards_Restructuring_the_Legal_Framework_for_Payment_System_in_Int%27l_Islamic_Trade_Finance.pdf

id	iium-30396
recordtype	eprints
spelling	iium-303962013-07-02T06:53:50Z http://irep.iium.edu.my/30396/ Towards restructuring the legal framework for payment system in international Islamic trade finance Oseni, Umar Aimhanosi HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects Purpose – The purpose of this paper is to examine the current legal framework for payment system in international Islamic trade finance vis-à-vis the new regime introduced by the Uniform Customs and Practice for Documentary Credits (UCP) 600 as well as the Shari'ah Standard on Documentary Credits issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Shari'ah Resolutions of selected Shari'ah Boards of Islamic financial institutions. Design/methodology/approach – A partial comparison of both the UCP 600 and the Shari'ah framework for documentary credit is given through the content analysis of relevant sources. Findings – The AAOIFI Shari'ah Standard on Documentary Credits, as well as other applicable Shari'ah resolutions of Islamic financial institutions, does provide a good framework for a Shari'ah-compliant documentary credit system, which is unique to trade in Islamic finance products, but there is scope for further improvement, taking into consideration the two possibilities proposed in the available literature on the subject – harmonization or bifurcation of rules. The UCP 600 also allows for the exclusion or modification of the rules to suit the specific needs of the Islamic finance industry. Research limitations/implications – This study focuses only on UCP 600 and the Shari'ah framework on Documentary Credits, though bearing mind that there are other frameworks for documentary credit systems such as the International Standby Practices (ISP98) and letters of credit issued under Article 5 of the New York Uniform Commercial Code. Practical implications – Islamic financial institutions should implement the provisions of the AAOIFI Shari'ah standard on documentary credits but may require a different framework for international trade financing involving both Islamic banks and conventional banks. Originality/value – Though few studies have been conducted on Shari'ah issues regarding the application of the documentary credits, this seems to be the first time where a more proactive step is taken to propose two different frameworks for transactions involving Shari'ah compliant financing. Emerald Group Publishing 2013 Article PeerReviewed application/pdf en cc_by_nd http://irep.iium.edu.my/30396/1/Towards_Restructuring_the_Legal_Framework_for_Payment_System_in_Int%27l_Islamic_Trade_Finance.pdf Oseni, Umar Aimhanosi (2013) Towards restructuring the legal framework for payment system in international Islamic trade finance. Journal of International Trade Law and Policy, 12 (2). 108 -129. ISSN 1477-0024 http://www.emeraldinsight.com/journals.htm?issn=1477-0024&volume=12&issue=2&articleid=17089865&show=abstract 10.1108/JITLP-10-2012-0016
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects
spellingShingle	HG1501 Banking KBP173.25 Islamic law and other disciplines or subjects Oseni, Umar Aimhanosi Towards restructuring the legal framework for payment system in international Islamic trade finance
description	Purpose – The purpose of this paper is to examine the current legal framework for payment system in international Islamic trade finance vis-à-vis the new regime introduced by the Uniform Customs and Practice for Documentary Credits (UCP) 600 as well as the Shari'ah Standard on Documentary Credits issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Shari'ah Resolutions of selected Shari'ah Boards of Islamic financial institutions. Design/methodology/approach – A partial comparison of both the UCP 600 and the Shari'ah framework for documentary credit is given through the content analysis of relevant sources. Findings – The AAOIFI Shari'ah Standard on Documentary Credits, as well as other applicable Shari'ah resolutions of Islamic financial institutions, does provide a good framework for a Shari'ah-compliant documentary credit system, which is unique to trade in Islamic finance products, but there is scope for further improvement, taking into consideration the two possibilities proposed in the available literature on the subject – harmonization or bifurcation of rules. The UCP 600 also allows for the exclusion or modification of the rules to suit the specific needs of the Islamic finance industry. Research limitations/implications – This study focuses only on UCP 600 and the Shari'ah framework on Documentary Credits, though bearing mind that there are other frameworks for documentary credit systems such as the International Standby Practices (ISP98) and letters of credit issued under Article 5 of the New York Uniform Commercial Code. Practical implications – Islamic financial institutions should implement the provisions of the AAOIFI Shari'ah standard on documentary credits but may require a different framework for international trade financing involving both Islamic banks and conventional banks. Originality/value – Though few studies have been conducted on Shari'ah issues regarding the application of the documentary credits, this seems to be the first time where a more proactive step is taken to propose two different frameworks for transactions involving Shari'ah compliant financing.
format	Article
author	Oseni, Umar Aimhanosi
author_facet	Oseni, Umar Aimhanosi
author_sort	Oseni, Umar Aimhanosi
title	Towards restructuring the legal framework for payment system in international Islamic trade finance
title_short	Towards restructuring the legal framework for payment system in international Islamic trade finance
title_full	Towards restructuring the legal framework for payment system in international Islamic trade finance
title_fullStr	Towards restructuring the legal framework for payment system in international Islamic trade finance
title_full_unstemmed	Towards restructuring the legal framework for payment system in international Islamic trade finance
title_sort	towards restructuring the legal framework for payment system in international islamic trade finance
publisher	Emerald Group Publishing
publishDate	2013
url	http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/ http://irep.iium.edu.my/30396/1/Towards_Restructuring_the_Legal_Framework_for_Payment_System_in_Int%27l_Islamic_Trade_Finance.pdf
first_indexed	2023-09-18T20:44:32Z
last_indexed	2023-09-18T20:44:32Z
_version_	1777409587009290240

Towards restructuring the legal framework for payment system in international Islamic trade finance

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