Composition and Working of the Sharia Supervisory Boards in Bahrain’s Islamic Banks

The global Islamic finance industry has grown rapidly in the last ten years recording an average growth of over 10 percent and is expected to touch USD 3 trillion by 2020. The Gulf Cooperation Council Countries, Iran and Malaysia; have been central to the success story of the global Islamic finance industry accounting for 83 percent of the market size. Even though Islamic finance covers a wide range of financial service segments, 75 percent of the global Islamic financial assets are held by Islamic Banks, which explains the general notion of equating Islamic finance with Islamic banking. Islamic banking refers to a system of banking, which is consistent and in compliance with Islamic law, also known as Sharia. It is seen as an alternative to western-based banking in Islamic countries. Even though many Islamic countries have in place a Sharia supervisory and governance framework for Islamic banks, it has often been commented that these frameworks are inadequate when it comes to addressing the issues and challenges confronting Islamic banks today. Previous researchers have specifically identified issues concerning the membership and workings of the Sharia Boards as one of the major challenges confronting growth of Islamic banks. The purpose of this paper is to examine and comment on the constitution, composition and functioning of Sharia Boards within Islamic banks based in the Kingdom of Bahrain.