Table I. Comparative analysis among the... | Emerald Publishing

Table I.

Comparative analysis among the Sharīʿah governance guidelines

Discussion	AAOIFI	IFSB	BNM
Base	The Kingdom of Bahrain	Kuala Lumpur, Malaysia	Kuala Lumpur, Malaysia
Clients	Islamic financial institutions including Islamic banks	Regulators	Islamic financial institutions including Islamic banks
Definition of Sharīʿah governance	Definition not provided.( Sharīʿah compliance)	A set of institutional and organizational arrangements through which an IFI ensures that there is effective independent oversight of Sharīʿah compliance	Definition not provided
SSB independence	SSB members are not to subordinate their judgment on Sharīʿah supervision matters to third parties They should not be the employees of the same IB and should not be involved in any matter concerning managerial decisions and operational responsibilities of the IBs SSB is required to continuously assess IBs to resolve any issues of independence impairment	The SSB should play an independent oversight role, with sufficient capability to implement objective judgment on matters related to Sharīʿah without influence from management or inappropriate outside interests No individual or group of individuals shall be allowed to dominate the Sharīʿah board’s decision-making	Independence of the SSB should be recognized at all times by the board in exercising their duties. In turn, the SSB is expected to make objective and informed decisions Decisions made by the SSB should not be discarded or changed without its approval
SSB competence	AAOIFI requires that SSB members be specialized in Islamic commercial jurisprudence (fiqh al-muʿāmalāt) Nonetheless, an SSB may include a member other than a fiqh al-muʿāmalāt specialist, but they need to be an expert in the field of Islamic financial institutions with knowledge of fiqh al-muʿāmalāt	The IFSB requires that the board of directors consider the following criteria when recommending members for the SSB: a. good character including, honesty, integrity, fairness and reputation; and b. competence, diligence, capability and soundness of judgment An SSB member must at least hold a bachelor’s in Sharīʿah from a recognized university	Requires that any person who bears responsibilities outlined in the Sharīʿah governance framework for an IB needs to have the necessary competency and continuously improve their knowledge and understanding on the Sharīʿah and Islamic finance The majority of members in the Sharīʿah Committee shall at least hold a bachelor’s degree in Sharīʿah from a recognized university
SSB responsibility	The main responsibility of the SSB is to provide direction, guidance, supervision related to the activities of IBs. The purpose is to ensure IBs are in compliance with Sharīʿah rules and principles SSBs have binding authority to direct, review and supervise the activities of IBs	The SSB has a clear mandate and responsibility for ensuring Sharīʿah compliance with respect to all Islamic financial products and services that the IB offers	An IB shall set out the accountability and responsibility of every key functionary involved in the implementation of the Sharīʿah governance framework This principle outlines the responsibilities of the board of directors (BoDs), SSBs and management
Frequency of SSB meetings	Not discussed	SSBs are required to meet regularly to carry out periodic reviews to monitor Sharīʿah compliance of the operations of the IFIs As and when necessary, the SSB can hold a meeting if the IB urgently requires to settle some matters related to the Sharīʿah The number of meetings to be held by the SSB is not provided. However, the IFSB requires that the SSB should meet with the board of directors at least twice a year	SSBs are required to hold regular meetings to ensure that the SSB is in touch with the operations of the IB The SSB meetings shall be held at least once every two months The number of SSB meetings held in the year, as well as the attendance of the SSB members, shall be disclosed in the IB’s annual report. (At least 75% attendance is required)
Sharīʿah review and Sharīʿah audit	Sharīʿah review as an examination of the extent of an IB’s Sharīʿah compliance It holds the management accountable for compliance as the Sharīʿah board is only responsible for forming and expressing opinions on the extent of Sharīʿah compliance AAOIFI does not require the establishment of a separate internal Sharīʿah audit department. However, AAOIFI recommends the establishment of an Audit and Governance Committee at the board level	To maintain a control mechanism, the IFSB requires IBs to have both an internal and external Sharīʿah review unit in addition to the conventional internal and external auditors	Required to maintain a Sharīʿah compliance function consisting of both review and audit functions, supported by risk management control process and internal research capacity The Sharīʿah review function ensures that the operations of the IFI do not breach the Sharīʿah The Sharīʿah audit function ensures an effective internal control system for Sharīʿah compliance
Risk management function	Not discussed	Not discussed	Required to identify, measure, control and monitor Sharīʿah non-compliance risks which result from the IB’s operations and activities
Research function	Not discussed	Not discussed	Conducts research, pre-product approval process, and administrative and secretarial dealings relating to the SSB

Discussion	AAOIFI	IFSB	BNM
Base	The Kingdom of Bahrain	Kuala Lumpur, Malaysia	Kuala Lumpur, Malaysia
Clients	Islamic financial institutions including Islamic banks	Regulators	Islamic financial institutions including Islamic banks
Definition of Sharīʿah governance	Definition not provided.( Sharīʿah compliance)	A set of institutional and organizational arrangements through which an IFI ensures that there is effective independent oversight of Sharīʿah compliance	Definition not provided
SSB independence	SSB members are not to subordinate their judgment on Sharīʿah supervision matters to third partiesThey should not be the employees of the same IB and should not be involved in any matter concerning managerial decisions and operational responsibilities of the IBsSSB is required to continuously assess IBs to resolve any issues of independence impairment	The SSB should play an independent oversight role, with sufficient capability to implement objective judgment on matters related to Sharīʿah without influence from management or inappropriate outside interestsNo individual or group of individuals shall be allowed to dominate the Sharīʿah board’s decision-making	Independence of the SSB should be recognized at all times by the board in exercising their duties.In turn, the SSB is expected to make objective and informed decisionsDecisions made by the SSB should not be discarded or changed without its approval
SSB competence	AAOIFI requires that SSB members be specialized in Islamic commercial jurisprudence (fiqh al-muʿāmalāt)Nonetheless, an SSB may include a member other than a fiqh al-muʿāmalāt specialist, but they need to be an expert in the field of Islamic financial institutions with knowledge of fiqh al-muʿāmalāt	The IFSB requires that the board of directors consider the following criteria when recommending members for the SSB:a. good character including, honesty, integrity, fairness and reputation; andb. competence, diligence, capability and soundness of judgmentAn SSB member must at least hold a bachelor’s in Sharīʿah from a recognized university	Requires that any person who bears responsibilities outlined in the Sharīʿah governance framework for an IB needs to have the necessary competency and continuously improve their knowledge and understanding on the Sharīʿah and Islamic financeThe majority of members in the Sharīʿah Committee shall at least hold a bachelor’s degree in Sharīʿah from a recognized university
SSB responsibility	The main responsibility of the SSB is to provide direction, guidance, supervision related to the activities of IBs. The purpose is to ensure IBs are in compliance with Sharīʿah rules and principlesSSBs have binding authority to direct, review and supervise the activities of IBs	The SSB has a clear mandate and responsibility for ensuring Sharīʿah compliance with respect to all Islamic financial products and services that the IB offers	An IB shall set out the accountability and responsibility of every key functionary involved in the implementation of the Sharīʿah governance frameworkThis principle outlines the responsibilities of the board of directors (BoDs), SSBs and management
Frequency of SSB meetings	Not discussed	SSBs are required to meet regularly to carry out periodic reviews to monitor Sharīʿah compliance of the operations of the IFIsAs and when necessary, the SSB can hold a meeting if the IB urgently requires to settle some matters related to the SharīʿahThe number of meetings to be held by the SSB is not provided. However, the IFSB requires that the SSB should meet with the board of directors at least twice a year	SSBs are required to hold regular meetings to ensure that the SSB is in touch with the operations of the IBThe SSB meetings shall be held at least once every two monthsThe number of SSB meetings held in the year, as well as the attendance of the SSB members, shall be disclosed in the IB’s annual report. (At least 75% attendance is required)
Sharīʿah review and Sharīʿah audit	Sharīʿah review as an examination of the extent of an IB’s Sharīʿah complianceIt holds the management accountable for compliance as the Sharīʿah board is only responsible for forming and expressing opinions on the extent of Sharīʿah complianceAAOIFI does not require the establishment of a separate internal Sharīʿah audit department. However, AAOIFI recommends the establishment of an Audit and Governance Committee at the board level	To maintain a control mechanism, the IFSB requires IBs to have both an internal and external Sharīʿah review unit in addition to the conventional internal and external auditors	Required to maintain a Sharīʿah compliance function consisting of both review and audit functions, supported by risk management control process and internal research capacityThe Sharīʿah review function ensures that the operations of the IFI do not breach the SharīʿahThe Sharīʿah audit function ensures an effective internal control system for Sharīʿah compliance
Risk management function	Not discussed	Not discussed	Required to identify, measure, control and monitor Sharīʿah non-compliance risks which result from the IB’s operations and activities
Research function	Not discussed	Not discussed	Conducts research, pre-product approval process, and administrative and secretarial dealings relating to the SSB

Source: Adapted from IFSB (2009), BNM (2010), AAOIFI (2018)