‘Fatwa Repositioning’: The Hidden Struggle for Shari’a Compliance Within Islamic Financial Institutions

Ullah, Shakir; Harwood, Ian; Jamali, Dima

doi:10.1007/s10551-016-3090-1

Cited by 75 publications

(102 citation statements)

References 46 publications

(72 reference statements)

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“…The Islamic guidelines prohibit engaging in sinful activities such as alcohol, pornography, casinos, pork-related products, etc., (El Hawary et. al 2004, Ullah et. al 2018, Usmani 1999.…”

Section: Shariah Principles Islamic Banking and Risksmentioning

confidence: 97%

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Corporate governance andShariahnon-compliant risk in Islamic banks: evidence from Southeast Asia

Basiruddin

Ahmed

2019

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Purpose This study aims to investigate the relationship between corporate governance and Shariah non-compliant risk (SNCR) that is unique for Islamic banks. The study examines the roles of Shariah committee along with the board of directors in mitigating SNCR. Design/methodology/approach The paper empirically investigates the implications of characteristics of board of directors and Shariah committee on the SNCR by using a sample of 29 full-fledge Islamic banks from Malaysia and Indonesia over the period 2007-2017. All data is hand collected from the Islamic banks' annual reports with the exception of country-level data collected from the World Bank database. Findings The results show that banks with a smaller board size and higher proportion of independent board members are likely to have lower SNCR. The findings also indicate that the financial expertise and higher frequency of Shariah committee meetings reduces the SNCR. Collectively, the analysis shows that banks with strong corporate governance environments reduce SNCR. Practical implications The findings of the study shed light on the relationship between corporate governance practice, Shariah committee characteristics and SNCR. The results can be used by different stakeholders such as policymakers, boards of directors and senior management of Islamic banks to mitigate SNCR. Originality/value This study extends the literature on corporate governance and risk-taking by including additional dimensions of governance and risk type. The corporate governance mechanism at the board level is complemented by including the Shariah committee characteristics and SNCR which is relevant to Islamic financial institutions is examined.

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“…The Islamic guidelines prohibit engaging in sinful activities such as alcohol, pornography, casinos, pork-related products, etc., (El Hawary et. al 2004, Ullah et. al 2018, Usmani 1999.…”

Section: Shariah Principles Islamic Banking and Risksmentioning

confidence: 97%

“…Applying shariah pronouncements of SC, however, can hinder the goals of profitability as the rules limit the markets and products that Islamic banks can serve. Ullah et. al.…”

Section: Agency Theory Governance and Shariah Non-compliant Risk In mentioning

confidence: 99%

Corporate governance andShariahnon-compliant risk in Islamic banks: evidence from Southeast Asia

Basiruddin

Ahmed

2019

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“…2 It is well accepted that Shari'ah supervisory boards (SSB) operating in Islamic financial institutions like Takaful carry a responsibility for providing religious assurance which contributes to the soundness of the Islamic governance system by endorsing the religious-ethical legitimacy to stakeholders (Bougatef, 2015). The SSB also has added responsibility for issuing an annual Shari'ah report on the religious compliance of operations which is communicated in annual reports of all Islamic financial institutions (see Maali et al, 2006;Ullah et al, 2016). 3 Technical efficiency refers to the effectiveness with which an output is produced with a given set of inputs.…”

Section: Introductionmentioning

confidence: 99%

Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market

Karbhari

Muye

Hassan

et al. 2018

Journal of International Financial Markets, Institutions and Mo

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This study examines the relationship between corporate governance attributes and both technical and scale efficiencies of the global Takaful Insurance operators. Using alternative estimators for efficiency, our results show that Takaful operators are inefficient suggesting the presence of widespread managerial lethargy and operational inefficiency. Additional analyses indicate that non-executive directors, audit committees, and product diversification do not improve technical efficiency. Rather, audit committees and regulatory jurisdiction tends to reduce scale efficiency. We also find that CEO/chair duality, board size, organizational age, regulatory jurisdiction and firm size have a positive relationship with technical efficiency. We further report that non-executive directors, Shari'ah board, product diversification and institutional ownership improve scale efficiency. In particular, the study provides new and extended regional evidence on the efficiency of the Takaful industry in the Middle East North Africa (MENA) and the Southeast East Asian (ASEAN) region. Our findings provide important policy implications for investors, regulators, and other market participants.

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“…Chapra and Khan (2000) and Chapra and Ahmed (2002) identified the limitations of time and supportive staff of Shari'ah Scholars in performing their tasks effectively. Fatwa shopping, tempting or influencing or 185 Shari'ah compliance in Islamic banking invisible hand of management on the decision of Shari'ah Supervisory Board, different interpretation of existing Shari'ah rulings (Grais and Pellegrini, 2006;Ullah, 2012) and lack of specially-designed Shari'ah-complaint financial products (Koch and Stenberg, 2010) were found to instigate Shari'ah violation.…”

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confidence: 99%

Shari’ah compliance in Islamic banking

Ullah

2014

International Journal of Islamic and Middle Eastern Finance and Management

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If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to evaluate the Shari'ah compliance status of the Islamic banks in Bangladesh. Design/methodology/approach -The research was based on both primary and secondary materials. The primary data were gathered through sample questionnaire survey and personal interviews by the researcher; the secondary data were obtained from Qur'an, Hadiths, different circulars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks. Statistical tools and techniques like weighted average, percentage, SD, variance and correlation between Shari'ah violation score and bank-specific attributes were used applying statistical software Statistical Package for Social Science (version 17.0). Findings -Shari'ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition, Shari'ah compliance status highly varies among the Islamic banks, and Shari'ah violation is high in investing activities because of lack of knowledge, lack of sincerity in complying Shari'ah, poor attention in Shari'ah audit and Shari'ah research and lack of strong Shari'ah supervisory board comprising full-time skillful members. Practical implications -Among others, the major policy implications of this study are as follows: regulatory bodies and Shari'ah board members are expected to have guidelines from this study to find their limitations and to determine their future responsibilities; executives and Employees are expected to get the idea of present state of Shari'ah compliance and to identify their weaknesses in this regard; clients and other stakeholders are expected to have guidelines to choose the better Islamic banks to perform banking transactions; and the researchers in Islamic banking may usefully use the issues raised in this article for more comprehensive studies in Islamic banking and Shari'ah compliance. Originality/value -The paper opens a new avenue in justifying the status of Shari'ah compliance with a new dataset and correlating Shari'ah violation score with bank-specific attributes.

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‘Fatwa Repositioning’: The Hidden Struggle for Shari’a Compliance Within Islamic Financial Institutions

Cited by 75 publications

References 46 publications

Corporate governance andShariahnon-compliant risk in Islamic banks: evidence from Southeast Asia

Corporate governance andShariahnon-compliant risk in Islamic banks: evidence from Southeast Asia

Governance mechanisms and efficiency: Evidence from an alternative insurance (Takaful) market

Shari’ah compliance in Islamic banking

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