Regulating the conversion of conventional banks to Islamic: the 4 Quadrants Conversion (4-QC) framework

• Main Authors: Suleiman, Sani Dalhatu, Sharofiddin, Ashurov, Mustapha, Abubakar
• Format: Article
• Language: English
• Published: Bank Indonesia 2023
• Subjects: HG1501 Banking; HG3368 Islamic Banking and Finance
• Online Access: http://irep.iium.edu.my/105918/7/105918_Regulating%20the%20conversion%20of%20conventional%20banks.pdf; http://irep.iium.edu.my/105918/; https://jcli-bi.org/index.php/jcli/issue/view/8; https://doi.org/10.21098/jcli.v2i2.158

This research paper proposes a framework for converting conventional banks to full-fledged Islamic banks as a catalyst for propelling the Islamic finance industry to Islamic Finance 2.0 by addressing the paucity of a regulatory framework for Central Banks to regulate this conversion. To address this, the paper proposes the “4Quadrants Conversion (4-QC) Framework” as a model framework for Central Banks to regulate the conversion process, consisting of twenty four components classified into four quadrants. The proposed conversion involves leaving Shari’ah non-compliant activities and adopting Shari’ah permissible alternatives. This paper adopts a qualitative research method based on content analysis. The research findings suggest that the proposed regulatory framework can facilitate successful conversion, resulting in a dual result of creating new Shari’ah-compliant entities and eliminating non-compliant entities. The proposed regulatory framework can also guide banks to plan, implement, and self-assess their progress to ensure a timely and less cumbersome conversion.