The Effectiveness of Sharī'ah Supervisory Board Roles in Islamic Banks

17 Pages Posted: 21 Nov 2013

See all articles by Dian Rahajeng

Dian Rahajeng

Essex Business School, The University of Essex; Universitas Gadjah Mada - Faculty of Economics and Business

Date Written: April 13, 2012

Abstract

Among the main issues surround corporate governance in Islamic banking is that dealing with the role of Sharī'ah Supervisory Boards (SSB). The role of the SSB is particularly important before the launching of any new Islamic banking product and in making strategic decisions. Therefore, in Islamic banking, the role of the SSB is essential, particularly as the Sharī'ah-compliance gatekeeper. In practise, the Banks tend to practice fatwa-shopping to support their new Islamic products and launch them as lawful Islamic products by selecting SSB who will approve and works in line with their long-term products concept. Therefore internal supervision of Sharī'ah scholar inside of SSB will mainly be important to prevent fatwa shopping in Islamic banks. The main focus of this conceptual research is to analyse the effectiveness of the SSB as the Sharī'ah gatekeeper in Islamic Banks. The previous studies have shown the urgencies of having SSB yet clearly stated the effectiveness SSB roles. Therefore this paper will contribute on developing the practical implementation of architecture and infrastructure for Islamic banks.

Keywords: Sharī'ah Supervisory Board, Effectiveness, Corporate Governance

JEL Classification: G20, G30, E58, G00, G34, G32, G24, G28, G38

Suggested Citation

Rahajeng, Dian, The Effectiveness of Sharī'ah Supervisory Board Roles in Islamic Banks (April 13, 2012). Available at SSRN: https://ssrn.com/abstract=2357831 or http://dx.doi.org/10.2139/ssrn.2357831

Dian Rahajeng (Contact Author)

Essex Business School, The University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

HOME PAGE: http://www.essex.ac.uk/ebs/

Universitas Gadjah Mada - Faculty of Economics and Business ( email )

Bulaksumur, Yogyakarta
Yogyakarta, Special Province of Yogyakarta
Indonesia

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