Abstract
This paper examines the relationships between the effectiveness of Shariah supervisory board (SSB), their remuneration and mode of financing Islamic bank. The SSB effectiveness is evaluated by an index based on 9 attributes score. This study comprises 18 Islamic banks in which operating in Malaysia from the year 2012 to 2013 as a sample. Our regression analysis shows that the effectiveness of SSB does not concern with the mode of Islamic bank financing. However, we found that SSB remuneration and bank’s financial growth shown a positive and significant relationship with mode of financing. The implications of these findings are discussed.
Highlights
There is a strong debut on the Islamic mode of financing which do not underlie with the banner of Islamic banking in which constitutes the elimination of injustices of the interest-based system as ordained by Holy Qur'an
There are many views can be discussed towards the mode of financing adopted by the Islamic banks, this study aims to explain whether Shari’ahsupervisory boards (SSB) and their remuneration have any significant influence towards the choices of Islamic banks mode of financing
The study shows that the assets size of Islamic banks are consist of small, medium and large banks where high standard deviation of .78972 indicates that banks are differences in size with average size of
Summary
There is a strong debut on the Islamic mode of financing which do not underlie with the banner of Islamic banking in which constitutes the elimination of injustices of the interest-based system as ordained by Holy Qur'an. Based on the work of Ahmad, (2014) who suggested that, SSB plays an important role, in harmonizing the Islamic rules and guidelines in Islamic banks (i.e.,Shari’ah-compliance gatekeeper), this study argued that the choices of style of financing by Islamic banks should be tempted by this board as to avoid any injustices as what has been proposed in Shari’ah Law. In other words, the SSB should put highly concern with regard to any mode of financing by the Islamic bank in which are not aligned with the profit- sharing principles
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