Shariah Governance: Effectiveness of Shariah Committees in Islamic Banks in Malaysia

17 Pages Posted: 27 Jan 2015 Last revised: 12 Mar 2015

See all articles by Shamsher Mohamad

Shamsher Mohamad

University Putra Malaysia - Graduate School of Management

Zulkarnain Muhamad Sori

INCEIF, The Global University of Islamic Finance

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF)

Date Written: January 25, 2015

Abstract

An effective system of rules, practices and processes by which Islamic Financial Institutions (IFIs) are directed and controlled is important to ensure their business operations are Shariah compliant, which has implications on their reputation, Shariah Governance and the future growth of the Islamic finance industry. Seventeen Chairman of the Shariah Committee of Islamic Banks in Malaysia were interviewed on the challenges faced in carrying out their responsibilities and their views on the effectiveness of Shariah Committees in Islamic Banks. This paper summarizes the various challenges faced by Shariah committees in general and in Islamic Banks in Malaysia in particular. Different from their conventional counterparts that focus only on maximizing wealth of shareholders, IFIs protect the interests of all stakeholders (including shareholders) and initiatives to maximize wealth are permitted by guides that ensure no form of any injustice to all stakeholders. Specifically, issues related to effectiveness of Shariah Committees such as independence, confidentiality, competence, consistency and information disclosure are discussed.

Keywords: Shariah Governance, Shariah Committee, Islamic Financial Institutions, Independence, Competence, Consistency

JEL Classification: M10, M20, M40, N20

Suggested Citation

Mohamad, Shamsher and Muhamad Sori, Zulkarnain and Shah, Mohamed, Shariah Governance: Effectiveness of Shariah Committees in Islamic Banks in Malaysia (January 25, 2015). Available at SSRN: https://ssrn.com/abstract=2555373 or http://dx.doi.org/10.2139/ssrn.2555373

Shamsher Mohamad (Contact Author)

University Putra Malaysia - Graduate School of Management ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

Zulkarnain Muhamad Sori

INCEIF, The Global University of Islamic Finance ( email )

Lorong Universiti A
Kuala Lumpur, Kuala Lumpur 59100
Malaysia
+60376514173 (Phone)
8 (Fax)

HOME PAGE: http://www.inceif.org/

Mohamed Shah

International Centre for Education in Islamic Finance (INCEIF) ( email )

Kuala Lumpur
Malaysia

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