Scintific Journal of "Islamic Finance Researches" (IFR)

Central Sharia Board and Mechanism of Sharia Supervision in Islamic Banks; Emphasizing International Standards and Countries' Experiences

Document Type : Iranian National Islamic Banking Conference - Melli Bank Study Center

Author

Researcher, Financial Studies and Islamic Banking Department, Monetary and Banking Research Institute, Central Bank, Tehran, Iran

Abstract

Failure to comply with the rules and principles of sharia poses risks in the banking system. In this regard, in addition to sharia supervision standards issued by international institutions, each of the countries involved in Islamic finance, while considering the variety and level of their specializations, has determined a solution to ensure compliance with shariah when dealing with Islamic financial and banking products. Hence, the high significance of improving sharia supervision and the need to form sharia supervisory boards in the Central Bank and other Islamic banks to ensure sharia compliance of their activities and products. This research, after stating the importance of sharia risk and sharia supervision in Islamic banks, has identified the standards published by the most important international institutions such as the Islamic Financial Services Board (IFSB) and the Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI) in the field of sharia supervision, and investigated the experiences of different countries in that regard. Finally, some suggested solutions for strengthening sharia supervision of the countries’ banking system have been presented. The results show that in most countries, each Islamic financial institution is required to form an internal Sharia Supervisory Board (SSB) to ensure compliance of banking operations with sharia principles, and in some others, they have created a higher sharia authority at the supervisory level, such as the Central Bank, which, by standardizing and integrating Islamic rules and laws, plays an important role in ensuring sharia compliance of their activities.

Keywords

  1. بانک مرکزی جمهوری اسلامی ایران (۱۴۰۰). دستورالعمل تأیید صلاحیت و عزل یا هرگونه تغییر مدیران ارشد و اعضای کمیته‌های ریسک، حسابرسی داخلی و رعایت قوانین و مقررات (تطبیق) مؤسسات اعتباری. ایران: بانک مرکزی جمهوری اسلامی ایران.
  2. روحانی، سیدعلی؛ و بنی‌طبا، سید مهدی (۱۳۹۶). پیامدهای نبود نظارت شرعی بر نظام بانکی ایران، دلالت‌های سیاستی. فصلنامه اقتصاد اسلامی، 2(۶)، ۸۷-۱۱۷.
  3. کمیسیون اوراق بهادار مالزی (۱۳۸۵). مصوبات شورای مشورتی شرعی کمیسیون اوراق بهادار مالزی (مهدی نجفی و سید سعید شمسی‌نژاد: مترجمان). ایران: انتشارات دانشگاه امام صادق علیه‌السلام.
  4. محرابی، لیلا؛ و ندرری، کامران (۱۳۹۷). اصول حاکمیت شرکتی در نهادهای ارائه‌دهنده خدمات مالی اسلامی، بیست‌ونهمین همایش بانکداری اسلامی، ایران: موسسه عالی بانکداری ایران، بانک مرکزی جمهوری اسلامی ایران.
  5. موسویان، سید عباس؛ و میثمی، حسین (۱۳۹۳). آسیب‌شناسی نظارت شرعی در نظام بانکی ایران و ارائه اصلاح‌های قانونی. فصلنامه اقتصاد اسلامی، 14(54)، ۱۰۱-۱۲۹.
  6. موسویان، سیدعباس؛ نظرپور، محمدنقی؛ و کفشگر جلودار، حسین (1388). نقش شورای تخصصی فقهی در ارتقای سطح مشروعیت و کارایی بانک های اسلامی (مطالعه تجربه چند کشور اسلامی). فصلنامه اقتصاد اسلامی، 9(36)، 59-88..
  7. میثمی، حسین (۱۳۹۵). نظارت شرعی در بانکداری اسلامی؛ ماهیت، تجربه و دلالت‌هایی جهت اصلاح قانون عملیات بانکی بدون ربا، مجموعه مقالات اولین گردهمایی بین المللی بانکداری و تأمین مالی اسلامی. ایران: پژوهشکده پولی و بانکی بانک مرکزی جمهوری اسلامی ایران.
  8. Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). (2010). Accounting, Auditing and Governance Standards for Islamic Financial Institutions, Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions.
  9. AAOIFI. (2010). Governance Standards for Islamic Financial Institutions. Bahrain: Accounting and Auditing Organization for Islamic Financial Institutions.
  10. (2022). AAOIFI Standards, Available at http://www.aaoifi.com/en/standards-and-definitions/shari’a-standards/
  11. Al-Rajhi, (2010), Shaia Board, Available at: http://alrajhibank.com.sa/aboutus/shariaagroup.aspx.
  12. Akhtar, S. (2007), Shariah Compliant Corporate Governance, Journal of Islamic Banking and Finance, (24)2, 9-17.
  13. Ahmed, H., & Chapra, M. U. (2002). Corporate Governance in Islamic Financial Institution (Occasional Paper) (No. 93). The Islamic Research and Teaching Institute (IRTI).
  14. Bank Islam Malaysia Berhad (2020). Reports and Financial Statements for the Financial Year Ended 31 December 2020, Available at: https://www.bankislam.com/wp-content/uploads/Bank-Islam-Financial-Statements-2020.pdf
  15. BNM Malaysia (2013). Islamic Financial Services Act 2013. 1-187, Kuala Lumpur
  16. BNM, (2011). Shariah Governance Framework for Islamic Financial Institutions, Malaysia, BNM/RH/GL_012_3, 1-48.
  17. BNM, (2019). Shariah Governance, Malaysia, BNM/RH/PD 028-100, 1-22.
  18. BNM, (2022). Shariah Advisory Council, Malaysia, Available at: https://www.bnm.gov.my/committees/sac
  19. Central Bank of the UAE. (2020). Standard Shariah Governance for Islamic Financial Institutions, U.A.E.
  20. Esen, A & Karabacak, S. (2014). National Shariah Boards: Global Applications and the Case of Turkey, Afro Eurasian Studies Journal 3(2), 5-16.
  21. Farrukh, R. (2016). Central Shariah Board (CSB) and Long Term Growth of Islamic Financial Industry, OIC Exchanges forum – 10th Meeting, Istanbul.
  22. Grais, Wafik, and Matteo Pellegrini (2006), Corporate Governance and Stakeholders’ Financial Interests in Institutions Offering Islamic Financial Services, World Bank Policy Research Working Paper 4053
  23. Grassa, R. (2015). Shariah Supervisory Systems in Islamic Finance Institutions Across the OIC Member Countries. Journal of Financial Regulation and Compliance 23, 135–160. doi: 10.1108/jfrc-02-2014-0011.
  24. Shah, H.S, (2015). Central Shriah Board in Central Banks: A Comparative Study of Pakistan and Brunei, 10th International Conference on Islamic Economics and Finance, Doha, Qatar.
  25. Hassan, M. K., Ullah, M. H., & Khanam, R. (2017). Case studies of Shariah governance practices in Bangladesh. In HBKU-QFC Roundtable on Islamic Finance-Shariah Governance in a Globalized World.
  26. IFSB (2021a). Establishment, Islamic Financial Services Board, Available at: https://ifsb.org/background.php
  27. Kayadibi, S. & Güçlü, F. (2021). Shariah Governance for Islamic Financial Institutions in the Context of Malaysia, Theoretical and Empirical Perspectives on Economic and Financial Issues, 629-649.
  28. Abu-Tapanjeh, A. M. (2009). Corporate Governance from the Islamic Perspective: A Comparative Analysis with OECD Principles. Critical Perspectives on Accounting, 20(5), 556-567.
  29. Ali, N. A. M., Shahida, S., & Shafii, Z. (2018). Knowledge, Skills and Characteristics Requirements for Shari'ah Auditors. Asian Journal of Accounting and Governance. 9, 181-200.
  30. Mustafa Ansari, O. (2012), Governance for Islamic Mutual Fund Industry, Presented in Conference on Islamic Funds & Investment, Alhuda CIBE.
  31. SAMA (2020), Shariah Governance Framework for Local Banks Operating in Saudi Arabia, The Saudi Central Bank, 1-16.
  32. Samra, E. (2016). Corporate Governance in Islamic Financial Institutions. Student Paper. University of Chicago Law School Chicago Unbound. 7-10.
  33. SBP (2003). Strategic Plan for Islamic Banking Industry in Pakistan (2003 to 2007). Pakistan: State Bank of Pakistan.
  34. SBP (2008). Instructions and guidelines for Sharīʿah-Compliance in Islamic Banking Institutions. Pakistan: State Bank of Pakistan, Islamic Banking Department.
  35. SBP (2014). Shari’ah Governance Framework for Islamic Banking Institutions (IBIs). Pakistan: State Bank of Pakistan-Islamic Banking Department.
  36. Selvam, J, (2008), Call for More Intellectual Capital, Islamic Banking and Finance, 6(16), 12-14.
  37. Ulfi, I., Mubarrok, U. S., & Wahyudi, M. (2020). Optimization the Role of Shariah Supervisory Board for Shariah Governance in Islamic Banking. Perisai: Islamic Banking and Finance Journal, 4(1), 47-47.
  38. Yasin, M. (2020), New Shari’ah Governance Standards for Islamic Financial Institutions, Dubai International Financial Centre (DIFC).
  39. Zulkifli, H. (2011). A Survey on Shari’ah Governance Practices in Malaysia, GCC Countries and the UK: Critical Appraisal, International Journal of Islamic and Middle Eastern Finance and Management, 1(4), 120-141.
Scintific Journal of
Volume 12, The First Special Issue: The First National Conference of Islamic Banking in Iran
July 2023
Pages 103-148
  • Receive Date: 09 January 2023
  • Revise Date: 14 May 2023
  • Accept Date: 21 May 2023