SHARI’AH COMPLIANCE ISSUES IN THE PRACTICES OF MURABAHAH FINANCING PRODUCTS OFFERED BY BANKING INSTITUTIONS IN TANZANIA

Abstract

Islamic banking industry in Tanzania began in 2008. Currently, it has several banking institutions with Islamic banking windows and one full-fledged Islamic bank. In this industry, Murabahah has been used in most of the financing products. Therefore, this paper discusses and analyses the Shari’ah compliant issues in the practices of Murabahah financing products offered by
banking institutions in Tanzania and proposes the ways forward. The findings of this paper revealed that there are several Shari’ah problems such as charging of application fees, use of conventional insurance, uncertainty of agency contract and ownership of the commodity for sale. This happens due to absence of Islamic banking legal and regulatory framework, weaknesses in the banking institutions, and commitment of the people. The methodology adopted in this paper is based on qualitative and descriptive approaches, review, and analysis of authoritative and non-authoritative legal and Shari’ah sources, as well as observations. The study recommends for the establishment of Islamic banking legal and regulatory framework, adoption of guidelines for Murabahah financing, and enhancement of the Shari’ah Boards performance. Moreover, knowledge on the essence of Shari’ah compliance should be disseminated to the people, and Tawarruq Commodity