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The impact of Shari’ah governance practices on Shari’ah compliance in contemporary Islamic finance
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Alkhamees, Ahmad (2012) The impact of Shari’ah governance practices on Shari’ah compliance in contemporary Islamic finance. Working Paper. Coventry: University of Warwick. Warwick School of Law Research Paper (Number 2012/24).
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Official URL: http://ssrn.com/abstract=2147435
Abstract
The objective of this article is to highlight the impact of regulatory issues of the Shari’ah Supervisory Board (SSB) on Shari’ah compliance in the contemporary Islamic finance industry. For institutions offering Islamic Financial Services (IIFS) to gain the trust of their Muslim clients, financial institutions normally incorporate a religious board in the form of an SSB. In theory, the function of the SSB is to ensure that IIFS operate within Shari’ah norms and teachings. However, given that SSBs in countries like Saudi Arabia, Egypt,Turkey and the United Kingdom are generally unregulated, concerns have been raised about the feasibility of a viable and functional Shari’ah governance culture in IIFS. Doubts relate mainly to the unclear functions and legal settings of SSBs; a lack of accountability and transparency; conflict of interests and the lack of independence of SSBs, as well as poor training and the inadequate qualifications of SSB members. The key argument in this article is that the prevalence of these critical governance issues largely reduces the level of Shari’ah compliance in the Islamic finance industry. Thus, the article argues that regulators in Islamic and secular countries need to intervene and regulate Shari’ah governance in IIFS so as to ensure a sound financial system and investor confidence.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Divisions: | Faculty of Social Sciences > School of Law | ||||
Series Name: | Warwick School of Law Research Paper | ||||
Publisher: | University of Warwick | ||||
Place of Publication: | Coventry | ||||
Official Date: | 16 August 2012 | ||||
Dates: |
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Number: | Number 2012/24 | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Access rights to Published version: | Open Access (Creative Commons) |
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