Prospects of an online dispute resolution framework for Islamic Banks in Malaysia: An empirical legal analysis

Abstract

Purpose

This study aims to examine the prospects of using an online dispute resolution (ODR) platform for resolving relevant Islamic banking disputes in the usual banker–customer relationship in Malaysia. It is argued that through proper regulation, such innovative dispute management mechanism would not only address some legal risks associated with banking disputes but could also prevent reputational risks in the Islamic financial services industry.

Design/methodology/approach

Based on an internet survey, responses were obtained from about 109 respondents in Malaysia. The data obtained were subjected to multivariate statistical analyses considering factors such as access to justice, attitude of stakeholders, resolving disputes, practical issues and understanding of ODR.

Findings

The results obtained showed that “access to justice”, “attitude of stakeholders” and “resolving disputes” are the most influencing factors affecting the intention to use ODR among stakeholders, particularly customers and bankers in the Islamic financial services industry in Malaysia.

Practical implications

This study provides a way in which the recently introduced Islamic Financial Services (Financial Ombudsman Scheme) Regulations 2015 can be better enhanced to cater for internet banking disputes which might require an ODR framework.

Originality/value

Though there have been numerous studies on the dispute resolution framework in the Islamic banking industry in Malaysia generally, the current study focuses on a less explored framework – ODR– a new framework for handling banking disputes.

Citation

Oseni, U.A. and Omoola, S.O. (2017), "Prospects of an online dispute resolution framework for Islamic Banks in Malaysia: An empirical legal analysis", Journal of Financial Regulation and Compliance, Vol. 25 No. 1, pp. 39-55. https://doi.org/10.1108/JFRC-07-2016-0055