Browsing by Author "Jan, Sahibzada Muhammad Wasim"

The State Bank of Pakistan has introduced a new SharÊÑ’ah governance framework for Islamic banking in Pakistan recently which was influenced by its past and continues to influence the present Islamic banking legal and operational experiences. The research is designed to analyze critically its theoretical, historical, structural and operational aspects. It explores the main theme of SharÊÑ’ah governance framework and its formation in Pakistan’s Islamic banking system. It also examines the influence of different regulatory authorities on SharÊÑ’ah governance framework and identifies the roles and responsibilities of each organ in its operational structure. It uses the critical, analytical and comparative methodology. The study is mostly based on the available literature produced in the past and present related to Pakistan’s Islamic banking system. The result of the study reveals that SharÊÑ’ah governance is simply a complement of the traditional corporate governance system in addition to its Islamic worldview. The historical study discovers that Islamic banking is a religious and financial need for the large Muslim population of the country. It points out that there is an overlapping situation among the supervisory authorities but no specification is found for a decisive role of any high authority to deal with the Islamic banking issues. The State Bank of Pakistan and its SharÊÑ’ah Board need to be granted with exclusive decisive role regarding Islamic banking matters. It discovers that the present SharÊÑ’ah governance framework is lacking legal and regulatory strength. The composition of the SharÊÑ’ah advisory boards at the central level and the institutional level need more improvements in terms of the number of SharÊÑ’ah advisors and the criteria for their selection and appointment. There is no specific provisions of the roles and responsibilities and privileges of the main organs of the SharÊÑ’ah governance framework which is crucially required by considering the framework implemented by Bank Negara Malaysia. The local regulatory system must be enhanced and the SharÊÑ’ah governance framework should be backed by legal amendments in the current system to prevent any possible systematic disorder.

This research attempts to analyze the role of three main institutions related to Islamic banking and finance in Pakistan which are the State Bank of Pakistan (SBP), it’s Shari'ah Advisory Committee (SAC) and the Shari'ah boards of Islamic banking institutions (IBIs) in regulating and supervising the practice of SShari'ah governance at IBIs. Considering the sound regulatory and supervisory arrangement of Malaysian Shari'ah governance practice, the main objective of the research is to critically analyze the role of these three institutions in Shari'ah governance while comparing it with the role performed by Bank Negara Malaysia (BNM), its Shari'ah Advisory Council (SAC) and the Shari'ah Committees of IBIs in practicing Shari'ah governance in Malaysia. Applying descriptive methodology, the research mainly depends on the data collected from secondary sources such as the regulatory guidelines, policy documents, standards and directives issued by central banks of Malaysia and Pakistan as well as research articles, papers and books on subject matter. The research findings reveal that the basic regulatory arrangement for Shari'ah governance practice is similar in both countries. The similar aspects indicate that the central banks in the two countries play their regulatory roles under the auspices of their central Shari'ah advisory bodies. Likewise, at the industry level, a Shari'ah Governance Framework has been implemented in both countries where the affairs of IBIs are supervised by institutional Shari'ah bodies. The research has discovered that there are no legal provisions dedicated to the regulatory arrangements of SBP for Shari'ah governance practice which need an adequate legal support. In addition, some regulations have inconsistencies and are not defined distinctively to cater the regulatory needs of IBIs. Considering the significant role of central SAC, its composition, criteria for appointment and resolutions are yet to be supported with legal provisions and specified regulations so it could reflect the apex position in the Shari'ah governance of IBIs. The establishment of Shari'ah board at IBI, its composition and membership affiliation lack legal basis and sound regulatory arrangement. It requires additional members with diversified qualifications to meet the challenges of the dynamics of Islamic banking industry, and restriction to single board membership to avoid conflict of interest. Besides, there should be a regulatory arrangement for assessing the performance of Shari'ah boards to ensure accountability and productivity of the members. Also, the role of the Shari'ah board should be made comprehensive and independent. In order to ensure consensus and produce conclusive ruling, the role of the Shari'ah board in IBI should be made supreme while the other organs such as Shari'ah compliance department and Shari'ah review functions should facilitate the role of the Shari'ah board.