An empirical investigation into the role, independence and effectiveness of Shari’ah boards in the Malaysian Islamic banking industry

Sheikh Hassan, Ahmad Fahmi ORCID: https://orcid.org/0000-0002-5240-8054 2012. An empirical investigation into the role, independence and effectiveness of Shari’ah boards in the Malaysian Islamic banking industry. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

Islamic banks' operations are guided by the principles and values laid down in Islam (i.e., the Shari'ah). To ensure Shari'ah compliance on the operations of the bank and to inspire the confidence of shareholders and stakeholders, each Islamic bank is required to establish a Shari'ah board. This study empirically investigates the Shari'ah boards operating in the Malaysian Islamic banking industry and specifically examines the influence of the dual-layer Shari'ah governance system on Malaysian Islamic banking practices where, besides the regulated Shari'ah board, Shari'ah supervision at the highest level is undertaken by the Shari'ah Advisory Council (SAC) of the Central Bank of Malaysia. Two separate questionnaire surveys were distributed to banks offering Islamic banking in Malaysia. One was sent to the Shari'ah department of the Islamic banks and the second to the branch managers to assess the current practice and the expectations regarding how the issues investigated are being practised by the Shari'ah board. Furthermore, a series of in-depth interviews were undertaken with important stakeholders within the Malaysian Shari'ah governance framework. Essentially, this study indicates that Shari'ah boards do in the main undertake a valuable Shari'ah advisory role and reveals the existence of an established structure for Shari'ah reviews. However, the Shari'ah reviews were found not to be effectively implemented by the Shari'ah boards thus raising concern regarding the quality of the Shari'ah reports issued by the boards highlighting both the importance and need for an external Shari'ah audit. In addition, the composition of the Shari'ah board members is revealed to have influence over the quality of Shari'ah decisions issued by the board. Moreover, the integrity of the Shari'ah board members, such as their ethical value, reputation and scholarly background, was found to be important in influencing its accountability and independence. Interestingly, Shari'ah boards were also perceived by branch managers of not providing the required level of involvement. The study also emphasises that branch managers felt the Shari'ah Advisory Council (SAC) to be the most important party within the Malaysian Shari'ah governance framework, and that the dual-layer Shari'ah governance system was viewed as having contributed to the standardisation of Islamic banking. Also, it appears that the role played by the Shari'ah Advisory Council (SAC) is not limiting creativity in developing Islamic banking products.

Item Type:	Thesis (PhD)
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Date of First Compliant Deposit:	30 March 2016
Last Modified:	10 Oct 2023 16:26
URI:	https://orca.cardiff.ac.uk/id/eprint/27957

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