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Shari'ah Governance in Islamic Banks

Zulkifli Hasan

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An in-depth and insightful study of Shari'ah governance from a theoretical and practical perspective

Shari'ah governance has a profound influence on the day-to-day practice of Islamic Financial Institutions (IFIs) and each jurisdiction has adopted a different approach to developing a governance framework. This book reviews these pluralistic approaches and identifies best practice.

Covers the following aspects:

  • Theoretical aspects of corporate and Shari'ah governance
  • The regulatory framework for Shari'ah governance
  • Shari'ah governance approaches
  • The role of the Shari'ah Board and the mechanisms for ensuring its independence, transparency and competence
  • Operational procedures of Shari'ah governance
  • An assessment of the Shari'ah Board

Examples, case studies and practical discussions based on IFIs in Malaysia, the GCC countries of Bahrain, UAE, Qatar, Kuwait & Saudi Arabia and the UK enliven the text.

Contents


LIST OF TABLES
LIST OF FIGURES
LIST OF STATUTES
ACKNOWLEDGEMENTS
DEDICATION
INTRODUCTION
CORPORATE GOVERNANCE: A CONVENTIONAL PERSPECTIVE
1.1 Conceptual Definition

1.2 Defining Corporate Governance in the Financial Services Sector
1.3 Role of Corporate Governance
1.4 Corporate Governance Systems
2.4.1 The Anglo-Saxon Model
2.4.2 The European Model
1.5 Corporate Governance in the Financial Services Sector
1.6
Conclusion
CORPORATE GOVERNANCE IN ISLAMIC FINANCIAL INSTITUTIONS
2.0 Introduction
2.1 Conceptual Framework of Corporate Governance from an Islamic Perspective
2.2 Role of Corporate Governance in IFIs
2.3 The Development of Corporate Governance in IFIs
2.4 Corporate Governance Model from Islamic Perspective
3.4.1 Tawhīd and Shura-Based Model
3.4.2 Stakeholder Value Approach
2.5 Conclusion
THE SHARI’AH GOVERNANCE SYSTEM IN ISLAMIC FINANCIAL INSTITUTIONS
3.0 Introduction
3.1 Conceptual Framework of Shari’ah governance Systems
3.2 Objectives of the Shari’ah governance System
3.3 Institutionalization of the Shari’ah board
3.4 Models of Shari’ah Boards
3.5.1 Internal Shari’ah boards
3.5.2 External Shari’ah boards
3.5 Role of the Shari’ah board
3.6 International Standard-Setting Agencies 3.6.1 The AAOIFI Governance Standards
3.6.2 The IFSB Guiding Principles 3.7
Shari’ah Governance Process 3.7.1
Appointment 3.7.2
Composition
3.7.3 Qualification
3.7.4 The Shari’ahCompliance Process
3.7.5Shari’ahCoordination
3.7.6 Shari’ahCompliance Review
3.7.7 Shari’ahReport
3.8 Issues and Challenges
3.8.1 Independence of Shari’ah board
3.8.2 Competence, Conflict of Interest and Confidentiality
3.8.3 Disclosure and Transparency
3.8.4 Sharīʿah-Compliant versus Sharīʿah-Based
3.8.5 Consistency
3.8.6 The Remit of Various Institutions of Shari’ah boards
3.9 Conclusion
REGULATORY FRAMEWORK OF SHARI’AH GOVERNANCE SYSTEM IN MALAYSIA, GCC COUNTRIES AND THE UK
4.0 Introduction
4.1 The Shari’ah governance Model from a Regulatory Perspective
4.1.1 Reactive Approach
4.1.2 Passive Approach
4.1.3 Minimalist Approach 4.1.4 Proactive Approach
4.1.5 Interventionist Approach
4.2 Shari’ah governance Systems in Malaysia, GCC Countries and the UK
4.2.1 Malaysia
4.2.2 GCC Countries
4.2.3 United Kingdom
4.3 Regulatory Issues
4.3.1 Legal Status of Shari’ahPronouncements
4.3.2 Court Jurisdiction
4.3.3 Addressing Issues of Differences of Shari’ahResolution 4.3.4
Executive, Advisory and Supervisory Roles of the Shari’ah board
4.4 Conclusion
THE STATE OF SHARI’AH GOVERNANCE PRACTICES IN ISLAMIC BANKS
5.0 Introduction
5.1 Research Methodology
5.2 Searching the Particularities of Shari’ah governance in Islamic Banking
5.2.1 Shari’ah board Members
5.2.2 Shari’ah governance Approach
5.2.3 Shari’ah governance and Regulation
5.2.4 Role of Shari’ah board
5.2.5 Attributes of Shari’ah board Members
5.2.6 Operational Procedures
5.2.7 Assessments of the Shari’ah board
5.3 Shari’ah governance Index
5.3.1 The Overall Score of Shari’ah governance
5.3.2 Shari’ah governance Scores for IFIs in Malaysia, GCC Countries and the UK
5.3.3 Shari’ah governance Scores According to Year of Incorporation
5.4 Conclusion
SHARI’AH GOVERNANCE DISCLOSURE IN ISLAMIC BANKS
6.0 Introduction
6.1 The State of Shari’ah Governance Disclosure Practices
6.1.1 Macro Analysis
6.1.1.1 Shari’ah governance Disclosure in Malaysia, GCC countries and the UK
6.1.1.2 Shari’ah governance Scores According to Year of Incorporation
6.1.2 Micro Analysis
6.1.2.1 Commitment to Shari’ah governance
6.1.2.2 Shari’ah board Information
6.1.2.3 Shari’ah board’s Remuneration
6.1.2.4 Shari’ahReport
6.1.2.5 Shari’ahPronouncements
6.1.2.6 Shari’ahCompliance Review
6.1.2.7 Information on Products and Services
6.1.3 Summary of the Overall Shari’ah governance Scores
6.2 Conclusion
THE WAY FORWARD
7.0 Introduction
7.1 The Way Forward
7.2 EPILOGUE
APPENDIX 1: QUESTIONNAIRE
BIBLIOGRAPHY



About the Author

Zulkifli Hasan is a Senior Lecturer in the Faculty of Shari'ah and Law, at the Islamic Science University of Malaysia. He has also worked extensively in the Islamic finance industry as an advocate and solicitor - as in-house counsel for Bank Muamalat Malaysia Berhad, and as a member of the Rules and Regulations Working Committee for the Association of Islamic Banking Institutions, Malaysia. He has published articles in numerous publications including Journal of International Banking Law and Regulation, Global Islamic Finance Magazine, Review of Business Research and Shari'ah Law Reports

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