Abstract
The aim of this paper is to verify whether participatory depositors, a special category of stakeholder that entrusts its savings to the Islamic Bank on the basis of the Profit and Loss Sharing principle, could be better protected by providing for them to be represented in the governance bodies of the Bank.The analysis that was carried out and consideration of potential risks this category of saver could be exposed to shows the need to ensure greater protection to participatory depositors compared to other stakeholders. Three working hypotheses on the protection method to be applied are formulated.The study was carried out on the basis of a comparative analysis of four case studies from Malaysia, Morocco, Germany and Italy respectively.The performed analysis has led to the conclusion that the representation of participatory depositors should be provided in specific corporate governance committees.
Highlights
The Islamic Bank is based on the precepts and principles of religious derivation that oversee the Islamic economic system
The main objective of this analysis is to understand whether participatory depositors, given the risk to which they are exposed, could be better protected than other stakeholders by providing for them to be represented in the governance bodies of the Islamic Bank so as to have an active role in the corporate governance of the Islamic Bank
To analyse the three hypotheses formulated on the matter, this section presents the comparative analysis of the examined cases, with reference to the Islamic Bank regulation system and the practices which have been adopted by each examined country
Summary
The Islamic Bank is based on the precepts and principles of religious derivation that oversee the Islamic economic system. The Islamic Bank shares the risk of loss that is connected with the projects it finances. In particular types of Islamic financing contracts, the depositor takes on the risk of being a participatory depositor, i.e. a party that entrusts its money to the Islamic Bank, with the latter managing and monitoring the raised money on the basis of the PLS principle (participation in the profits and losses of the financed project). Participatory depositors are stakeholders similar to shareholders because they invest their money in accordance with the Profit and Loss Sharing principle but are not formally recognised within the bank (Chapra & Ahmed, 2002; Archer & Karim, 2009; Magalhaes & Al-Saad, 2013; Hamza, 2016)
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