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Shariah Governance: Challenges Ahead

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  • Abdul Aziz, Ahmad Faizal

Abstract

Bank Negara Malaysia (BNM) had previously issued a number of statutory requirements in making the establishment of Shariah Committee (SC) of a bank mandatory via Islamic Banking Act 1983, Banking & Financial Institution Act 1989, Takaful Act 1984 and Central bank of Malaysia (Amendment) Act 2003. The establishment of SC is important as part of the governance of an Islamic Bank in order to assure the stakeholders that the Bank is doing its business in permissible manner as outlined by the Shariah. Despite the structure, there is still skepticism about the system mainly on the capacity and the capability of the SC as reported in previous publications. This paper shall identify challenges faced by the SC that had impaired their capacity and capability in achieving their objectives. Subsequently, this paper shall recommend alternative measures on issues highlighted in assisting the SC and Shariah Auditors in bridging the public expectations. This study confines to issues pertaining to Islamic Banks operating in Malaysia as published in relevant articles and the author’s personal encounter.

Suggested Citation

  • Abdul Aziz, Ahmad Faizal, 2012. "Shariah Governance: Challenges Ahead," MPRA Paper 47772, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47772
    as

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    File URL: https://mpra.ub.uni-muenchen.de/47772/1/MPRA_paper_47772.pdf
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    References listed on IDEAS

    as
    1. Iqbal, Zamir & Mirakhor, Abbas, 2004. "Stakeholders Model of Governance in Islamic Economic System," MPRA Paper 56027, University Library of Munich, Germany.
    2. repec:hrv:faseco:30728046 is not listed on IDEAS
    3. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    4. Iqbal, Zamir & Mirakhor, Abbas, 2004. "Stakeholders Model Of Governance In Islamic Economic System," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 11, pages 44-63.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Islamic Finance; Shariah Governance; Shariah Committee; Shariah Audit;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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