Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services

The structures and processes established within an institution offering Islamic financial Services (IIFS) for monitoring and evaluating Shariah compliance rely essentially on arrangements internal to the firm. By being incorporated in the institutional structure, a Shariah supervisory board (SSB) ha...

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Main Authors:	Grais, Wafik, Pellegrini, Matteo
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACCOUNTING ACCOUNTING PRACTICES ACCOUNTING STANDARDS ARTICLES OF ASSOCIATION AUDIT COMMITTEE AUDITING AUDITOR INDEPENDENCE AUTHORITY BANK NEGARA MALAYSIA BANK OF THAILAND BANKING SUPERVISION BANKING SYSTEM BANKS BUSINESS ORGANIZATIONS CAPITAL MARKETS CENTRAL BANKS CHARTER COMPANY CONFLICT OF INTEREST CONFLICTS OF INTEREST CONSENSUS CORPORATE ENTITY CORPORATE GOVERNANCE CORPORATE GOVERNANCE ARRANGEMENTS CORPORATION CORPORATIONS DEBT DECISION-MAKING DISCLOSURE DISTRIBUTION OF INCOME ECONOMIC ACTIVITY ECONOMIC GROWTH EMPLOYMENT ENFORCEABILITY ETHICAL STANDARDS EXTERNAL AUDITORS FINANCIAL CONTRACTS FINANCIAL INDUSTRY FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERESTS FINANCIAL MARKETS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STATEMENTS FINANCIAL TRANSACTIONS HOUSING HUMAN RESOURCE INCORPORATED INDEPENDENT DIRECTORS INDIVIDUALS INSTITUTIONAL ENVIRONMENT INSTITUTIONAL STRUCTURE INSURANCE INTEREST INCOME INTERNAL AUDIT INVESTMENT BANK ISLAMIC BANK ISLAMIC BANKING LABOR MARKET LAWS LEGISLATION LEGISLATIVE ACTS LIMITED MAJORITY SHAREHOLDERS MANAGEMENT REPORTS MANAGERS MARKET DISCIPLINE MINORITY SHAREHOLDERS MUTUAL FUNDS NON-BANK PEER REVIEW PROPERTY RIGHTS PROPRIETARY PUBLIC POLICY RATING AGENCIES REGULATORY FRAMEWORK REGULATORY INSTITUTIONS RENTS SECURITIES SHAREHOLDERS SOCIETY STAKEHOLDER STAKEHOLDERS STATE BANK STATE BANK OF PAKISTAN STOCK EXCHANGE STOCK MARKET STOCK MARKETS SUPERVISORY AUTHORITIES TRANSPARENCY TRUST FUNDS UNIVERSITIES
Online Access:	http://documents.worldbank.org/curated/en/2006/11/7186425/corporate-governance-shariah-compliance-institutions-offering-islamic-financial-services http://hdl.handle.net/10986/8901

id	okr-10986-8901
recordtype	oai_dc
spelling	okr-10986-89012021-04-23T14:02:41Z Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services Grais, Wafik Pellegrini, Matteo ACCOUNTING ACCOUNTING PRACTICES ACCOUNTING STANDARDS ARTICLES OF ASSOCIATION AUDIT COMMITTEE AUDITING AUDITOR INDEPENDENCE AUTHORITY BANK NEGARA MALAYSIA BANK OF THAILAND BANKING SUPERVISION BANKING SYSTEM BANKS BUSINESS ORGANIZATIONS CAPITAL MARKETS CENTRAL BANKS CHARTER COMPANY CONFLICT OF INTEREST CONFLICTS OF INTEREST CONSENSUS CORPORATE ENTITY CORPORATE GOVERNANCE CORPORATE GOVERNANCE ARRANGEMENTS CORPORATION CORPORATIONS DEBT DECISION-MAKING DISCLOSURE DISTRIBUTION OF INCOME ECONOMIC ACTIVITY ECONOMIC GROWTH EMPLOYMENT ENFORCEABILITY ETHICAL STANDARDS EXTERNAL AUDITORS FINANCIAL CONTRACTS FINANCIAL INDUSTRY FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERESTS FINANCIAL MARKETS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STATEMENTS FINANCIAL TRANSACTIONS HOUSING HUMAN RESOURCE INCORPORATED INDEPENDENT DIRECTORS INDIVIDUALS INSTITUTIONAL ENVIRONMENT INSTITUTIONAL STRUCTURE INSURANCE INTEREST INCOME INTERNAL AUDIT INVESTMENT BANK ISLAMIC BANK ISLAMIC BANKING LABOR MARKET LAWS LEGISLATION LEGISLATIVE ACTS LIMITED MAJORITY SHAREHOLDERS MANAGEMENT REPORTS MANAGERS MARKET DISCIPLINE MINORITY SHAREHOLDERS MUTUAL FUNDS NON-BANK PEER REVIEW PROPERTY RIGHTS PROPRIETARY PUBLIC POLICY RATING AGENCIES REGULATORY FRAMEWORK REGULATORY INSTITUTIONS RENTS SECURITIES SHAREHOLDERS SOCIETY STAKEHOLDER STAKEHOLDERS STATE BANK STATE BANK OF PAKISTAN STOCK EXCHANGE STOCK MARKET STOCK MARKETS SUPERVISORY AUTHORITIES TRANSPARENCY TRUST FUNDS UNIVERSITIES The structures and processes established within an institution offering Islamic financial Services (IIFS) for monitoring and evaluating Shariah compliance rely essentially on arrangements internal to the firm. By being incorporated in the institutional structure, a Shariah supervisory board (SSB) has the advantage of being close to the market. Competent, independent, and empowered to approve new Shariah-conforming instruments, an SSB can enable innovation likely to emerge within the institution. The paper reviews the issues and options facing current arrangements for ensuring Shariah compliance by IIFS. It suggests a framework that draws on internal and external arrangements to the firm and emphasizes market discipline. In issuing its fatwas, an SSB could be guided by standardized contracts and practices that could be harmonized by a self-regulatory professionals' association. A framework with the suggested internal and external features could ensure adequate consistency of interpretation and enhance the enforceability of contracts before civil courts. The review of transactions would mainly be entrusted to internal review units, which would collaborate with external auditors responsible for issuing an annual opinion on whether the institution's activities has met its Shariah requirements. This process would be sustained by reputable entities such as rating agencies, stock markets, financial media, and researchers who would channel signals to market players. This framework would enhance public understanding of the requirements of Shariah and lead to more effective options available to stakeholders to achieve improvements in Islamic financial services. 2012-06-25T13:57:01Z 2012-06-25T13:57:01Z 2006-11 http://documents.worldbank.org/curated/en/2006/11/7186425/corporate-governance-shariah-compliance-institutions-offering-islamic-financial-services http://hdl.handle.net/10986/8901 English Policy Research Working Paper No. 4054 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ACCOUNTING ACCOUNTING PRACTICES ACCOUNTING STANDARDS ARTICLES OF ASSOCIATION AUDIT COMMITTEE AUDITING AUDITOR INDEPENDENCE AUTHORITY BANK NEGARA MALAYSIA BANK OF THAILAND BANKING SUPERVISION BANKING SYSTEM BANKS BUSINESS ORGANIZATIONS CAPITAL MARKETS CENTRAL BANKS CHARTER COMPANY CONFLICT OF INTEREST CONFLICTS OF INTEREST CONSENSUS CORPORATE ENTITY CORPORATE GOVERNANCE CORPORATE GOVERNANCE ARRANGEMENTS CORPORATION CORPORATIONS DEBT DECISION-MAKING DISCLOSURE DISTRIBUTION OF INCOME ECONOMIC ACTIVITY ECONOMIC GROWTH EMPLOYMENT ENFORCEABILITY ETHICAL STANDARDS EXTERNAL AUDITORS FINANCIAL CONTRACTS FINANCIAL INDUSTRY FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERESTS FINANCIAL MARKETS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STATEMENTS FINANCIAL TRANSACTIONS HOUSING HUMAN RESOURCE INCORPORATED INDEPENDENT DIRECTORS INDIVIDUALS INSTITUTIONAL ENVIRONMENT INSTITUTIONAL STRUCTURE INSURANCE INTEREST INCOME INTERNAL AUDIT INVESTMENT BANK ISLAMIC BANK ISLAMIC BANKING LABOR MARKET LAWS LEGISLATION LEGISLATIVE ACTS LIMITED MAJORITY SHAREHOLDERS MANAGEMENT REPORTS MANAGERS MARKET DISCIPLINE MINORITY SHAREHOLDERS MUTUAL FUNDS NON-BANK PEER REVIEW PROPERTY RIGHTS PROPRIETARY PUBLIC POLICY RATING AGENCIES REGULATORY FRAMEWORK REGULATORY INSTITUTIONS RENTS SECURITIES SHAREHOLDERS SOCIETY STAKEHOLDER STAKEHOLDERS STATE BANK STATE BANK OF PAKISTAN STOCK EXCHANGE STOCK MARKET STOCK MARKETS SUPERVISORY AUTHORITIES TRANSPARENCY TRUST FUNDS UNIVERSITIES
spellingShingle	ACCOUNTING ACCOUNTING PRACTICES ACCOUNTING STANDARDS ARTICLES OF ASSOCIATION AUDIT COMMITTEE AUDITING AUDITOR INDEPENDENCE AUTHORITY BANK NEGARA MALAYSIA BANK OF THAILAND BANKING SUPERVISION BANKING SYSTEM BANKS BUSINESS ORGANIZATIONS CAPITAL MARKETS CENTRAL BANKS CHARTER COMPANY CONFLICT OF INTEREST CONFLICTS OF INTEREST CONSENSUS CORPORATE ENTITY CORPORATE GOVERNANCE CORPORATE GOVERNANCE ARRANGEMENTS CORPORATION CORPORATIONS DEBT DECISION-MAKING DISCLOSURE DISTRIBUTION OF INCOME ECONOMIC ACTIVITY ECONOMIC GROWTH EMPLOYMENT ENFORCEABILITY ETHICAL STANDARDS EXTERNAL AUDITORS FINANCIAL CONTRACTS FINANCIAL INDUSTRY FINANCIAL INFORMATION FINANCIAL INSTITUTION FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENTS FINANCIAL INTERESTS FINANCIAL MARKETS FINANCIAL PERFORMANCE FINANCIAL PERFORMANCES FINANCIAL SECTOR FINANCIAL SERVICES FINANCIAL STATEMENTS FINANCIAL TRANSACTIONS HOUSING HUMAN RESOURCE INCORPORATED INDEPENDENT DIRECTORS INDIVIDUALS INSTITUTIONAL ENVIRONMENT INSTITUTIONAL STRUCTURE INSURANCE INTEREST INCOME INTERNAL AUDIT INVESTMENT BANK ISLAMIC BANK ISLAMIC BANKING LABOR MARKET LAWS LEGISLATION LEGISLATIVE ACTS LIMITED MAJORITY SHAREHOLDERS MANAGEMENT REPORTS MANAGERS MARKET DISCIPLINE MINORITY SHAREHOLDERS MUTUAL FUNDS NON-BANK PEER REVIEW PROPERTY RIGHTS PROPRIETARY PUBLIC POLICY RATING AGENCIES REGULATORY FRAMEWORK REGULATORY INSTITUTIONS RENTS SECURITIES SHAREHOLDERS SOCIETY STAKEHOLDER STAKEHOLDERS STATE BANK STATE BANK OF PAKISTAN STOCK EXCHANGE STOCK MARKET STOCK MARKETS SUPERVISORY AUTHORITIES TRANSPARENCY TRUST FUNDS UNIVERSITIES Grais, Wafik Pellegrini, Matteo Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
relation	Policy Research Working Paper No. 4054
description	The structures and processes established within an institution offering Islamic financial Services (IIFS) for monitoring and evaluating Shariah compliance rely essentially on arrangements internal to the firm. By being incorporated in the institutional structure, a Shariah supervisory board (SSB) has the advantage of being close to the market. Competent, independent, and empowered to approve new Shariah-conforming instruments, an SSB can enable innovation likely to emerge within the institution. The paper reviews the issues and options facing current arrangements for ensuring Shariah compliance by IIFS. It suggests a framework that draws on internal and external arrangements to the firm and emphasizes market discipline. In issuing its fatwas, an SSB could be guided by standardized contracts and practices that could be harmonized by a self-regulatory professionals' association. A framework with the suggested internal and external features could ensure adequate consistency of interpretation and enhance the enforceability of contracts before civil courts. The review of transactions would mainly be entrusted to internal review units, which would collaborate with external auditors responsible for issuing an annual opinion on whether the institution's activities has met its Shariah requirements. This process would be sustained by reputable entities such as rating agencies, stock markets, financial media, and researchers who would channel signals to market players. This framework would enhance public understanding of the requirements of Shariah and lead to more effective options available to stakeholders to achieve improvements in Islamic financial services.
format	Publications & Research :: Policy Research Working Paper
author	Grais, Wafik Pellegrini, Matteo
author_facet	Grais, Wafik Pellegrini, Matteo
author_sort	Grais, Wafik
title	Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
title_short	Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
title_full	Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
title_fullStr	Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
title_full_unstemmed	Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services
title_sort	corporate governance and shariah compliance in institutions offering islamic financial services
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/11/7186425/corporate-governance-shariah-compliance-institutions-offering-islamic-financial-services http://hdl.handle.net/10986/8901
_version_	1764406714974601216

Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services

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