Shariah supervisory systems in Islamic finance institutions across the OIC member countries

Rihab Grassa

63 citations0/0 files storedJournal of Financial Regulation and Compliance

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Islamic Finance and Banking Studies Qur’anic Interpretation Studies Halal products and consumer behavior

Abstract

Purpose – This paper aims to discuss the different practices and regulatory frameworks of Shariah supervision in Islamic Financial Institutions (IFIs) across Organisation of Islamic Cooperation (OIC) member states and to identify the gaps in current Shariah supervisory practices. Parallel with the rapid growth of Islamic finance worldwide, corporate governance has received a considerable amount of attention in Islamic finance. Shariah is a unique characteristic of Islamic finance. That is why the need for a good and efficient Shariah governance system for IFIs is considered to be a crucial requirement to ensure the development and the stability of the Islamic finance industry. Design/methodology/approach – The paper is based on critical review of current laws and regulations for IFIs; this provides a reflective synthesis on the practical work of the Shariah supervisory system across the 25 different OIC member states. Findings – The paper reveals several findings. First, the authors observe a weak and poor Shariah supervisory system in most OIC member states. Furthermore, the authors detect various gaps in the current Shariah supervisory practices. Most of these shortfalls are linked to the current regulatory frameworks: the roles and the responsibilities of the national Shariah authority, and the institutional Shariah board’s duties and attributes. Originality/value – This paper’s originality and value lies in its critical review of current Shariah supervisory practices across 25 OIC member states. Also, the paper puts forward various suggestions to the regulatory authorities and to the Islamic Financial Services Board to enhance the Shariah governance system and to standardize the different practices of Shariah governance worldwide.

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References

2004The Corporate Governance of Banks: A Concise Discussion of Concepts and Evidence 2008Corporate governance from the Islamic perspective: A comparative analysis with OECD principles 2006Corporate Governance And Shariah Compliance In Institutions Offering Islamic Financial Services 2013Sharia governance in Islamic banks: effectiveness and supervision model 2006Corporate governance in Islamic perspective 2014Corporate governance of Islamic banks 2013Shariah supervisory system in Islamic financial institutions 2003The Corporate Governance of Banks. (Part 2: The Governance of Banks)

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