The Role of Shari’ah Advisors in Islamic Banking
One of the most distinguishing features in Islamic banks is the fact that they are always advised by experts in Islamic Shari’ah. Because the raison d’être of Islamic banks is the desire to follow the injunctions of Shari’ah in finance and investment, it became essential to give assurances to the public, particularly savers, that the bank is getting professional advice in that matter. Furthermore, since it was difficult to find bankers who are also well versed in Shari’ah, banks find it pertinent to affiliate to the management a Shari’ah board. Not all Islamic banks have a Shari’ah, board, nevertheless. Some, may have only one advisor. Others may seek the advice of many, but only when the need arises. The majority, however do retain a Shari’ah council which meets occasionally and clear model transactions and contracts, and issue an annual statement attesting the adherence of the management to the advice and instructions of the Shari’ah board vis the religious aspects of the business.
A typical Shari’ah board will have the following functions and duties:
a) Provide opinion on matters referred to it from the management of the bank, relating to the activities of the bank and their compliance with Shari’ah requirements.
b) Endorsing model contracts and standard agreements and assuring their compliance with Shari’ah.
c) Over-looking the activities of the bank in general and management's implementation of Shari’ah guidelines issued by the board, m particular.
d) Issuing an annual declaration which accompanies the banks financial statement, recording the board's views on the compliance of the bank with the Shari’ah requirements, addressed to the equity owners of the bank and its clients.
Source: An Introduction To Islamic Banking, Shaykh Dr Mohamed Ali Elgari. Republished with permission.
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