Sharī‘ah Governance in Islamic Banking Industry: A Critical Review

Abstract

The SG is a topic attracting great interest of the researchers of banking industry of Islam. The Sharī‘ah supervision is playing an important rather essential role in the governing the Islamic banks. Supervision of the Sharī‘ah Board and consistency in rule of Sharī‘ah are to be considered as mandatory components of an effective and efficient structure of Sharī‘ah Governance. The Sharī‘ah Council (SC), which is specific to Islamic banks, is considered to be the most important part of the SG framework. Since Islamic FI is similar in many ways to conventional FI, the existence of a good corporate governance framework is imperative. But unlike conventional FI, Islamic FI is responsible to guarantee compliance of the principles of Sharī‘ah in products of the Islamic Financial Institution and other operational management. The study will also addresses the issues of accountability/Sharī‘ah Audit and role of Sharī‘ah Supervisory Board in Islamic financial institutions in Pakistan and Malaysia. The purpose of this document is to examine and evaluate the critical assessment of SG in the Islamic banking sector. This paper infers after comparing different SGF that BNM provides a better way out. We find out that IFIs in Pakistan and Malaysia are under better SG.