Corporate Governance in Institutions Offering Islamic Financial Services: Issues and Options

46 Pages Posted: 20 Apr 2016

See all articles by Wafik Grais

Wafik Grais

World Bank

Matteo Pellegrini

Publish What You Pay (PWYP) Africa

Date Written: November 1, 2006

Abstract

This paper reviews institutions offering Islamic financial services (IIFS) corporate governance challenges and suggests options to address them. It first points out the importance of corporate governance for IIFS, where it would require a distinct treatment from conventional corporate governance and highlights three cases of distress of IIFS. It then dwells on prevailing corporate governance arrangements addressing IIFS' needs to ensure the consistency of their operations with Islamic finance principles and the protection of the financial interests of a stakeholders' category, namely depositors holding unrestricted investment accounts. It raises the issues of independence, confidentiality, competence, consistency, and disclosure that may bear on pronouncements of consistency with Islamic finance principles. It also discusses the agency problem of depositors holding unrestricted investment accounts. The paper argues for a governance framework that combines internal and external arrangements and relies significantly on transparency and disclosure of market relevant information.

Keywords: Banks&Banking Reform, Corporate Law, Non Bank Financial Institutions, Investment and Investment Climate, Privatization

Suggested Citation

Grais, Wafik and Pellegrini, Matteo, Corporate Governance in Institutions Offering Islamic Financial Services: Issues and Options (November 1, 2006). World Bank Policy Research Working Paper No. 4052, Available at SSRN: https://ssrn.com/abstract=940709

Wafik Grais (Contact Author)

World Bank ( email )

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Matteo Pellegrini

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