Awareness of effectiveness of shari`ah scholars role in corporate governance of islamic financial institutions in Malaysia

Abstract

The role of Shari ah committee and Shari ah review towards effective governance of Islamic Financial Institutions is that the Shari ah committee executes fiduciary duties to all the stakeholders of the Islamic Financial Institutions. Similarly, Shariah review board of Islamic Financial Institutions is to assist Muslims in abiding to their religious values by ensuring that the Islamic Financial Institutions products are ultimately Shari ah compliant. The purpose of this wholly qualitative research study was to explore the role and importance of Shari ah committee and Shari ah review in Corporate Governance of Islamic Financial Institutions in Malaysia excluding Islamic Insurance companies or Takaful companies. Data for the study was elicited through interviewing and document analysis and purposive sampling technique was utilized to select the respondents. The interview data analysis was performed by using a qualitative method which involved identifying interview themes, comparing the participants views and determining the commonality among their views. Emergent themes included: Corporate and Shariah Governance, Role of Sharlah Committee, Product Compliance and Innovation, Shariah Compliant Review and Shariah Report Adequacy. The findings amongst other things indicated that Shariah review and Shari ah committee of Islamic financial institutions play a role of overseeing that all operational process of the bank are Shariah Shariah compliant and that the Board of Director members need to be conversant with Islamic finance which is the critical indicator of corporate Governance. In conclusion, Shariah Governance has yet to be recognized by the Shari` ah scholars.