Islamic banking in South Africa - form over substance
Date
2016
Authors
Kholvadia, Faatima
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Abstract
The purpose of this study is to analyse the operational economics of Islamic banking
transactions in South Africa and to understand how the economics of these transactions lead
to the IFRS accounting. The study also aims to highlight the similarities and differences of
accounting for these transactions using IFRS, across the different South African banks.
The transactions analysed are deposit products of qard and mudaraba and financing products
of murabaha, ijarah and diminishing musharaka. The study was conducted through interviews
with representatives from each of the four South African banks which offer Islamic banking
products. Interviews were semi-structured and allowed for interviewees to voice their
perspectives increasing the validity of the interviews. The study found that the specific Shariah
requirements of Islamic banking transactions are considered and included in the structure of
the contracts by all four banks offering Islamic banking products. However, the economic
reality of these transactions closely resembles conventional banking transactions. The study
also found that all four banks account for Islamic banking transactions using IFRS but the
accounting does not match the Shariah requirements of each transaction, creating a cognitive
dissonance between the accounting and the contractual form of the transactions. This study
is the first of its kind in South Africa. The study adds to the IASB Consultative Group discussion
on accounting for Islamic banking transactions under IFRS.
Key words: Conceptual Framework, diminishing musharaka, IFRS, ijarah, Islamic banking,
mudaraba, murabaha, qard
Description
A research report submitted
In partial fulfilment of the requirements for the degree of
Master of Commerce
University of the Witwatersrand
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Citation
Kholvadia, Faatima (2016) Islamic banking in South Africa - form over substance, University of the Witwatersrand, Johannesburg, <http://wiredspace.wits.ac.za/handle/10539/22219>