Escolar Documentos
Profissional Documentos
Cultura Documentos
Page 1
6. The effective monitoring of the Over the past decade, the world has The Shariah Supervisory
management by the board seen a significant change in the role of Board
7. The boards accountability the private sector in economic The most common approach at
[OECD, 1999] progress and job creation. As more present is to establish independent
and more countries have assumed Shariah Supervisory Boards (SSBs), in-
It is clear that there is an overlap market-based approaches to house religious advisers and Shariah
between these principles, as both economic policy, mindfulness of the review units.
Islamic corporate governance and status of private corporations for the
conventional corporate governance welfare of individuals has improved. The role of the Shariah Supervisory
are concerned with: Corporations create jobs, generate tax Board includes:
1. shareholder and stakeholder income, produce a wide selection of 1. Certifying permitted financial
rights goods and services at sensible prices, instruments through fatawa
2. effective disclosure and progressively manage our savings 2. Verifying that transactions
3. transparency and secure our retirement income. comply with issued fatawa
4. accountability of management Amid growing reliance worldwide on 3. Calculating and paying Zakat
and the board the private sector, the issue of 4. Disposing of non-Shariah
5. obeying the rule of law corporate governance has likewise compliant earnings
increased in importance (OECD 5. Advising on the distribution of
Enhancing stakeholders value is a Principles of Corporate governance, income or expenses among
central purpose for any business, 2004). shareholders and Investment
including financial services, whether Islamic finance from the position of Account Holders (IAH)
conventional or Islamic. The stability, corporate governance represents an
financial performances, and ability to array of fascinating features, as equity A Shariah Supervisory Boards
intermediate resources will depend on participation, risk and profit-and-loss responsibilities will differ according to
stakeholders confidence in individual sharing measures form the basis of provisions specified in the articles of
institutions and the industry. A Islamic financing. The ban on interest association of the financial institution
particular confidence feature in means that an Islamic bank cannot or those specified by national
respect of Islamic financial services is charge any fixed return in advance, regulators. In addition to internal
the requirement of conveying to they, however partake in the profit corporate arrangements, national
stakeholders that their financial from the usage of the funds. The regulators and international standard
business is conducted in conformity depositors also share in the profits setters implement guidelines for
with their religious beliefs. Corporate according to a pre-set ratio, and are Shariah Supervisory Boards. These
governance arrangements include remunerated with profit earnings for guidelines frequently refer to Shariah
structures and procedures that should assuming the risk. Supervisory Boards general
provide sufficient comfort that the An Islamic bank is a partner with the responsibility to guarantee Shariah
business is conducted in accordance banks depositors and the compliance and also at times indicate
with specified objectives and in entrepreneurs and these financial areas of competence, composition
meticulous compliance with Shariah. arrangements infer rather diverse and decision-making.
The need for Islamic Financial stakeholder relations, and therefore
Institutions to get their house in order The functioning of Shariah
governance structures, as depositors
and implement good corporate Supervisory Boards raises
have a direct financial stake in the
five main issues of corporate
governance practices, that are in line bank's investment and equity
governance:
with recognized and expected participations. This leads to rather
business practice as well as being diverse governance issues that Islamic
compatible with the Shariah are banks and financial institutions face as (i) Independence
imperative. The key word being compared to conventional The Shariah Supervisory Board
implement practices and not just pay institutions. The Islamic financial members dual relationship with the
lip service to the principle. institution is subject to an added tier institution as providers of
of governance, compliant with Islamic remunerated services and as
law. assessors of the nature of operations
Peculiarities to IFI could be seen as creating a possible
conflict of interest.
Page 2
(ii) Confidentiality that is still not in place. The author Mercy has bestowed upon the human
Some Shariah scholars sit on the believes that it is the fundamental intellect, so that we are able to take
Shariah Supervisory Boards of more view of corporate governance and the due precautions, plan and prepare for
than one financial institution, this importance of it that is missing. The possible future events, and create a
provides the particular individual author postulates that corporate means of addressing those needs on
access to proprietary information of governance is a duty on every Muslim, our own. Therefore, preventative and
other possibly competing institutions. as is prayer, hajj and other such duties preparative actions are necessary in
(iii) Competence incumbent on every Muslim. all walks of life, and especially
Shariah Supervisory Board (SSB) Therefore, the application of it is not a business. The need for regulation to
members should ideally be matter of choice, and nor should it be ensure accountability is necessary,
knowledgeable in both Islamic law looked at from the benefits of doing and not just relying on self-regulation
and commercial and accounting so, although these are important, but due to the people following the
practices. In reality, it would appear rather should be considered at from Shariah of their own accord.
that very few scholars are well versed the angle of being an obligation. Therefore, corporate governance is
in both disciplines. Therefore, the application of not a matter of choice or a matter of
(iv) Consistency corporate governance procedures is a good practice or a way to ensure that
The activities of Shariah Supervisory form of worship, and also a duty for you are following the laws of the land.
Boards (SSBs) are in the nature of which a Muslim will be held Corporate governance in Islamic
creating jurisprudence by the accountable. He / she will be finance is a duty upon everyone who
interpretation of legal sources. It rewarded for their application and pronounces the Shahadah, just as
should therefore not be surprising to held accountable for neglecting them Salaat is a duty upon the person. This
find conflicting opinions on the or inadequate application. approach is what will remove the
admissibility of specific financial It is not enough to assume that just problems of corporate governance in
instruments or transactions. because someone is a Muslim, and by Islamic finance institutions. When
(v) Disclosure/Transparency that very nature is expected to obey people understand, it is a duty upon
A transparent financial institution the Shariah, that he / she will ensure them and that Allah (SWT) will hold
would ideally disclose the duties, that they do not do anything that will the accountable for this duty, then a
decision-making process, areas of be against the Shariah in terms of change will follow.
competence, and the composition of corporate governance duties.
the Shariah Supervisory Board, as well Although, in theory there is a
as publish all fatawa issued by the mechanism of self-accountability,
Shariah Supervisory Board. honesty, trust and therefore should be
self-regulatory, the fact of the matter
is that, this is just not the case, and a
The Islamic Viewpoint vigilant eye is necessary.
One day Prophet Muhammad (peace www.bcif.co.uk
The problem is that corporate be upon him) noticed a Bedouin
https://www.facebook.com/bcif.co.uk/
governance is inadequate in Islamic leaving his camel without tying it and
Financial Institutions, and researchers he asked the Bedouin,
believe that this is due to the entire
approach regarding the subject. Many "Why don't you tie down your camel?"
Corporate governance structures have
been put forward, implemented, The Bedouin replied:
along with principles and codes of "I put my trust in Allah."
behaviour. The importance of
corporate governance in enhancing The Prophet then said:
stakeholder value, as well as positive "Tie your camel first, then put your
effects towards the organisation have trust in Allah"
been spoken and written about by [At-Tirmidhi Hadith No: 2517]
Arshad Ashraf
many researchers and scholars. Researcher & lecturer
However, there is still something This refers to the common sense and in Islamic Finance
missing, there is a piece of the puzzle reasoning that Allah in His Infinite
Page 3