Sharia Boards and Islamic Financial Institutions - dummies

Sharia Boards and Islamic Financial Institutions

By Faleel Jamaldeen

A sharia board is probably the most easily recognizable feature that distinguishes an Islamic finance institution from a conventional one. All Islamic financial institutions are expected to operate in sharia-compliant ways, and the supervision provided by sharia boards ensures that compliance.

The Islamic finance industry is based on sharia principles. Sharia is Islamic law, a code of conduct that Muslims follow because they believe it’s God’s law. Sharia governs a broad spectrum of activities — from the way the justice system works in a Muslim country to how a Muslim family handles its everyday life. And, of course, within the Islamic finance system, sharia governs the way that banks, fund management companies, insurance fund operators, and other financial professionals conduct their business.

Even people who know nothing about Islamic finance have likely heard of sharia law, and opinions about sharia among non-Muslims are rarely positive. From East to West, sharia gets its share of criticism and negative media attention. But the way sharia is applied within a certain family or tribe shouldn’t taint its application in the Islamic financial industry. Islamic financial industry regulatory bodies and professionals are working hard to maintain a level of purity and transparency that greatly benefits all participants in the system.

To achieve that purity and transparency, the Islamic finance industry depends upon the support of sharia scholars: men and women who are deeply knowledgeable about sharia and who share their expertise by sitting on sharia boards that help govern Islamic financial institutions.