Issues of Letter of Credit in Malaysian Islamic Banks

Round 1

Reviewer 1 Report

The topic seems interesting. However, I have some concerns related to literature review and the research gap.  It is not clear to me the research gap in respect to the previous studies or how the interview questions have been constructed. The paper also did not identify its limitations or even its practical implications. The paper has no recommendations.

Author Response

Thanks for your constructive comments. Regards.

Author Response File: Author Response.pdf

Reviewer 2 Report

This is an exploratory study, which endeavors to investigate issues on Letter of Credit within the contract of murabahah and wakalah adopted by Islamic banks in Malaysia. The paper is timely and interesting and the following are recommended for its further improvement;

1- There are many findings in the paper which are reported as the following personal communications;

" < Page 11>....an officer of Bank 12 (personal communication, September 3, 2017)"

In which form did these personal communications take place and are they verifiable & available upon request?

2- While discussing the shariah-compliance issues, the authors are also recommended to discuss the following studies, in order to strengthen the theoretical foundations of the paper;

Alam et al (2021) examines the influences of Shariah governance mechanisms on Islamic banks' performance and Shariah compliance quality in Bangladesh.

Alam, M. K., Rahman, M. M., Runy, M. K., Adedeji, B. S., & Hassan, M. F. (2021). The influences of Shariah governance mechanisms on Islamic banks performance and Shariah compliance quality. Asian Journal of Accounting Research.

Ahmed (2014) discusses how traditional Islamic contracts are used to structure Islamic modes of financing during contemporary times.

Ahmed, H. (2014). Islamic banking and Shari’ah compliance: a product development perspective. Journal of Islamic finance., 3(2), 15-29.

Arslan-Ayaydin et al. (2018) indicates that Shariah law prohibits investments in firms for which the reported interest-based revenues exceed a predetermined percentage of the firm’s total revenue. However, the determination of these revenues are backward-looking and they offer a forward-looking approach.

Arslan-Ayaydin, Ö., Boudt, K., & Raza, M. W. (2018). Avoiding interest-based revenues while constructing Shariah-compliant portfolios: false negatives and false positives. The Journal of Portfolio Management, 44(5), 136-143.

3 - The paper is rather poorly written and there are grammatical and typographical errors which need to be extensively corrected.

Author Response

Thanks for your constructive feedback. Regards.

Author Response File: Author Response.pdf

Reviewer 3 Report

The paper analyses the issues of letter of credit in Malaysian islamic banks. The main aspects analyzed are the conversion of LC Wakalah (agency) to LC Murabahah (cost-plus), the existence of a sale contract between the customer and exporter and lastly, the title of goods stated in the bill of lading.

The literature review presents sufficient information to accommodate the reader with the background of the topic. The methodology is well presented and suitable for the analysed issues.  The conclusions are supported by the results.

Author Response

Thanks for your constructive comments. Regards

Round 2

Reviewer 1 Report

The authors revised their paper and it looks much better than before.