Abstract
Islamic finance continues to gain popularity regionally, internationally and both among the Muslim and non-Muslim countries. The Islamic Financial Institution (IFI) differs from its conventional counterpart in its governance structure. It is imperative for the IFI to maintain Shari’ah compliance in all its dealings. Hence, an essential element in the IFI is its Shari’ah Supervisory Board (SSB) and its Shari’ah Governance system. This paper empirically examines the SSB’s structure, and Shari’ah supervision function directly from the SSB members themselves. Right from their appointment, mandates and responsibiities, how they function, to their views on Shari’ah risk, Shari’ah compliance, and to how Shari’ah review and reporting is performed. The findings reveal issues related to the flow of information, governance of SBB and independence of Shari’ah supervision and Shari’ah review as some of the key issues that would need to be addressed/strengthened to enhance confidence, and contribute to the credibility of the of IFI and the Islamic finance market. The opinions expressed are towards having some regulatory involvement that would contribute to the enhancement of supervision.
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