SHARI’AH GOVERNANCE IN ISLAMIC FINANCE AND AN OVERVIEW OF THE DEBATES

Abstract

Shari’ah governance are internal mechanisms that allow and control Islamic financial institutions and their activities to act in accordance with Islamic principles and rules. This system, the most important distinctive feature of Islamic financial institutions, is extremely important both in terms of compliance of the system with Islamic principles and the credibility of these organizations in the eyes of the public. AAOIFI and IFSB have put their management standards in these field. In Islamic financial institutions, the most important element of shari’ah governance is the shari’ah board. Shariah boards may be of international, national or institutional level. The shariah governance function can also be fulfilled by consulting companies. In this paper, various shariah governance systems applied by Islamic financial institutions in the Gulf region and Southeast Asia will be clarified. Besides, key issues regarding this field and their solutions will be discussed.