[ms] Potential of Shariah Risk in Selected Takaful Operator in Malaysia

The Islamic finance industry has a uniqueness compared to the conventional financial industry. This situation is due to the Islamic finance industry has a need for Shariah compliance in Islamic finance industry and also is known as Shariah risk. Islamic capital market industry at global level has been the impact of shariah risk for example in 2007 when Sheikh Taqi Uthmani has declared that 85% of sukuk in the market are non Shariah compliant. This causes a decrease in the sukuk issuance in the next following year. Islamic banking in Malaysia is also a dispute about the status of Sharia-compliant contract Bay‘ ‘Bithaman Ajil (BBA). There are cases of court disputes related Shariah-compliant status of contract Bay‘ ‘Bithaman Ajil (BBA). The takaful industry in Malaysia is also exposed to shariah risks due to the shariah compliance requirements a in all operations and activities of the Takaful Operator. Therefore, this study will describe the key elements that result in a shariah risk in Islamic finance. The study also identified potential of shariah risk using a qualitative methodology based on research data from five informants who were experienced shariah compliance management in Takaful Operator. This study will analyze qualitative data using the Altas.ti 7. The findings show that there is a potential of shariah risk and incident of shariah risk in activities and operation of selected Takaful Operator in Malaysia. Keywords: Shariah risk; element of shariah risk; potential of shariah risk; takaful operator