Islamic Finance For Dummies

Part V

Reporting, Corporate Governance, and Supervision

In this part . . .

Much like their conventional counterparts, Islamic finance institutions are governed by regulatory agencies and accounting standards and must issue financial statements so regulators and investors can study their performance. I open this part with a chapter that focuses on those statements and points out how they may differ from the statements of conventional financial firms.

Next, I turn to the governance at Islamic financial institutions and how it may differ from that of a conventional firm. One key piece of the governance puzzle is supervision by a sharia board, which ensures that an Islamic institution’s operations and products comply with sharia (Islamic law). I devote Chapter 16 to explaining what this board looks like and what it does.

Finally, I dive into how Islamic financial firms manage risk — a primary function of corporate governance. In addition to all the risks that a conventional financial firm faces, Islamic institutions have particular risks related to ensuring sharia compliance. I explain those risks and how they’re mitigated in Chapter 17.