Adding Social Responsibility and Accountability to the Mandate of Shari'ah Advisory Boards

Abstract

Shari'ah advisors are specialized jurists, particularly in Shari'ah (Islamic Law), Fiqh Al-Muamalah (dealings), Islamic Finance and economics, they are entrusted with the duty of directing, reviewing and supervising the activities related to Islamic finance in order to ensure that they are in compliance with Shari'ah rules and principles, They are not accountable for their actions. The management of the financial institution is accountable for their organization performance and liability. The qualifications, responsibilities, ethos, and social responsibility of the Shari'ah board member are questionable, it should identified, regulated and accountable to the organization they represent and to the community affected by their decisions and above all it can effectively shape the Islamic finance system.This paper will disscuss in details the qualifications, ethos and the social responsibility of the Shari'ah advisory board.Unlike other advisory bodies, there is code of ethics and practice governs the performance of the consultant, for example Lawyers, Actuaries, accounts, and other professions there are code of ethics and misconduct governs the practice. The code of practice is to regulate the profession and make the consultant accountable to his clients for poor practice or misleading advice-causing financial losses, the consultant can be struck off and may be charges for serious misconduct. So far in the case of Shari'ah advisory board, there are neither code of ethics nor code of misconduct, although the decisions of Shari'ah Advisory Boards are binding, in relation to Shari'ah matter and that decision if wrong can cause the client and the community large sums of money. In this regard, they are not merely exercising an advisory role, but their roles are of great nature. Hence, because Shari'ah is the backbone of the industry, in certain countries or institutions, this body is called a Shari'ah Supervision Body, as it better describes the actual and intended role of the body. Observations of the various Shari'ah Advisory Boards around the globe will indicate that there are divergences in the Shari'ah governance system. The variation exists in relation to procedures, extent of power and levels of Shari'ah Advisory Bodies, composition of Shari'ah Advisory Bodies, determination of qualification of Shari'ah scholars, as well as Shari'ah and accounting standards applied. In certain countries, there is a Shari'ah Advisory Council at the central level, apart from the financial institution’s in-house Shari'ah Advisory Board. Therefore, the central Shari'ah Advisory Council might review the decisions or ijtihad made by the Shari'ah scholars in the respective financial institutions.