Foundations of Shari'ah Governance of Islamic Banks

Chapter 8Stages of Sharī‘ah Supervision and Responsibilities of the Sharī‘ah Supervisory Board

Chapter Summary

This chapter discusses the different stages of sharī‘ah supervision, the collective and individual responsibilities of Sharī‘ah Supervisory Board (SSB) members, and the annual sharī‘ah compliance report. It explains how Islamic banks (IBs) obtain sharī‘ah approvals through the use of executive SSB member(s), and the leadership role that the chairman of the SSB plays. The responsibilities of SSB members are explored starting with the issuance of a fatwa or an Islamic legal ruling. The fatwa issuance process and the conditions of the issuer and recipient of a fatwa are discussed along with the inevitable rise of differences in juristic opinions. These differences could be traced to the varying approaches adopted by muftis. Given the likelihood of mistakes occurring, the possibility of reversing a fatwa and the implications of doing so are summarized. This is followed by an analysis and critique of the different sections of the AAOIFI-provided sample sharī‘ah compliance report and the various opinions that may be presented therein.

8.1 Sharī‘ah Supervision

Sharī‘ah supervision is an important feature of the sharī‘ah governance system. The enactment of sharī‘ah supervision could be classified into ex-ante, intermediate and ex-post stages. The stages are interlinked such that any change in an earlier stage is reflected in the later stages. The literature which has classified ...