Current Practice Of Debt Recovery Methods In Islamic Banks In Malaysia

Abstract

Debt recovery is an essential activity either for Islamic banks or conventional banks in order to ensure the sustainability of the banks. The bad debt need to be managed properly or else the banks will experience problem with growing level of non-performing loan. One of  the  problems  faced  by  the  banks  in  collecting  debt  is  defaulted  debtor.  Many  have criticised and voice  out  their concern over non-ethical debt collection by Islamic banks. Therefore, the aim of this paper is to review the current practice of debt recovery methods in Islamic banks in Malaysia. This research employs the qualitative methodology utilizing content  analysis  technique.  Primary  data  is  collected  from  books and  academic  researches. The result  shows  that  the authorities in Malaysia provided  good  methods and  mechanisms  for  debt  recovery  in  Islamic  banks  in  Malaysia;  in  term  of  tools  of recovery, procedures, laws and  policy. However,  still  there is  a lack  in term of  enforcement, due  this situation, it has  affected the debtor.  Based on the findings of the study, the study recommended  that  the Islamic banks  should enforce  and  improve  the  debt recovery practice according to the laws and policies prescribed.