Publication:
Effectiveness of shariah committees in the Malaysian Islamic financial institutions: the practical perspective
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Date
2016-07-13
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Abstract
An effective system of rules, practices and processes by which Islamic Financial Institutions (IFIs) are directed and controlled to ensure their business operations are Shariah-compliant has important implications on their reputation and their future growth. The Shariah Committee is a mandated requirement by the central bank on every Islamic Financial Institution (IFI) to ensure the expected level of Shariah-compliance in their business operations. Unlike their conventional counterparts that focus only on maximizing the wealth of shareholders, IFIs has an extra responsibility to protect the interests of all stakeholders (including shareholders) and ensure that no injustice of any kind is committed to any stakeholder. In performing their responsibilities, the Shariah Committees experience challenges both within and outside their institutions that
adversely affect their effectiveness as gatekeepers of Shariah-compliance and hence mitigating Shariah non-compliance risk. Specifically, issues such as degree of independence, confidentiality, competence, and consistency and information disclosure might be compromised and mitigates the effectiveness of Shariah Committees.
Keywords
Shariah governance , Shariah Committee , Islamic financial institutions , Independence , Competence , Consistency
Citation
Ramadili Mohd, Shamsher Mohamad and Muhamad Sori, Zulkarnain. (2016). Effectiveness of shariah committees in the Malaysian Islamic financial institutions: the practical perspective. Middle East Insights Islamic Finance Special, 2, pp. 1-8.
Publisher
National University of Singapore
DOI
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Person
Shamsher Mohamad Ramadili Mohd
shamsher@inceif.org
Director, BNP-Paribas-INCEIF Centre for Islamic Asset and Wealth Management
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Person
Zulkarnain Muhamad Sori
zulkarnain@inceif.org
Deputy Director, BNP-Paribas-INCEIF Centre for Islamic Asset and Wealth Management