Summary of the book "Corporate Governance and Sharia in Islamic Banks"

Prepared by: Dr. Saad Al-Wabil

The book "Corporate and Shari'a Governance in Islamic Banks" explores the concept of corporate and Shari'a governance in Islamic banks as a fundamental component of their operations. It combines global governance principles with the Shari'a controls imposed by Islamic Shari'a.

Author Dr. Saad Al-Wabil discusses three main themes: governance in the banking sector, corporate governance in Islamic banks, and Sharia governance of these banks.

The general concept of governance in the banking sector

The book Corporate Governance and Sharia in Islamic Banks defines corporate governance as a regulatory framework that aims to enhance transparency and accountability within financial institutions, and is based on basic principles established by international organizations such as the Organization for Economic Cooperation and Development (OECD).OECD) and the Basel Committee.

The primary objectives of governance are to reduce financial risks, ensure the stability of banking institutions, and protect the rights of depositors and stakeholders. In this context, the book "Corporate Governance and Shari'a in Islamic Banks" addresses the internal and external factors that influence governance, such as the role of shareholders, regulatory bodies, and senior management in formulating bank policies and managing them effectively.

Corporate Governance in Islamic Banks

The book "Corporate Governance and Sharia in Islamic Banks" highlights the fundamental differences between conventional and Islamic banks in terms of governance structure. The latter rely on a unique system that combines modern institutional frameworks with Sharia rulings. The principles of corporate governance in Islamic banks include several elements, including:

Boards of DirectorsResponsible for setting strategic policies and monitoring performance.

Executive Management:Works to implement strategic plans in line with Sharia controls.

StakeholdersThis includes customers, shareholders and employees who affect and are affected by the bank's performance.

Disclosure and transparencyIt is a key element in ensuring customer and investor confidence in the bank, by providing accurate and regular financial reports.

Sharia governance in Islamic banks

Sharia governance is the foundation that distinguishes Islamic banks from other conventional banking institutions. It relies on the presence of a Sharia supervisory board that monitors the compliance of banking operations with Islamic Sharia principles. The book "Corporate and Sharia Governance in Islamic Banks" discusses the importance of this Sharia oversight in ensuring compliance with Islamic jurisprudence, particularly with regard to banking contracts, such as Murabaha, Mudaraba, and Musharaka. The Sharia governance system consists of:

Sharia Supervisory BoardIt consists of a group of jurists specializing in Islamic finance, and their mission is to issue fatwas and recommendations on banking products.

Internal Sharia AuditIt is a system that aims to monitor the extent to which banking operations comply with the decisions issued by the Sharia Supervisory Board.

International Sharia standardsIslamic banks are based on standards set by the Islamic Financial Services Board (IFSB).IFSB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) to ensure consistency in the application of Shariah provisions.

The book "Corporate Governance and Shari'a in Islamic Banks" highlights the crucial role of corporate governance and Shari'a in enhancing the stability of Islamic banks and achieving their financial and social objectives. It asserts that combining modern governance principles with Shari'a controls represents a balanced banking model that can be more sustainable than conventional banking systems, if implemented according to precise standards.

Challenges Facing Sharia and Institutional Governance

Islamic banks face a number of challenges that may impact the effectiveness of governance implementation, most notably:

Variation in Sharia standardsFatwas related to banking transactions vary from one Sharia authority to another, leading to inconsistencies in the application of Sharia standards among banks.

Lack of specialized cadresThere is still a pressing need for more experts specializing in Islamic finance, particularly in the areas of Shariah auditing and risk management in accordance with Islamic principles.

Lack of unified legal frameworksIn some countries, banking legislation is still not compatible with the nature of Islamic banks, hindering their ability to operate effectively within a clear and stable legal framework.

Balance between Sharia compliance and profitabilityIslamic banks strive to achieve profits while adhering to Sharia-compliant regulations. This challenge requires innovative solutions to create Sharia-compliant financial products that are both profitable and sustainable.

Proposed solutions to enhance governance in Islamic banks

To address these challenges, the book "Corporate and Sharia Governance in Islamic Banks" proposes several solutions that can contribute to the development of Sharia and institutional governance in Islamic banks, including:

Strengthening the role of Sharia bodiesBy increasing its independence and developing unified mechanisms for reviewing financial transactions and issuing fatwas.

Establishing unified Sharia standardsCooperation between Islamic financial institutions and international bodies to establish unified Shari'ah standards can help reduce jurisprudential differences and enhance customer and investor confidence in Islamic banks.

Develop specialized training programsBanks can invest in developing their employees' capabilities through specialized training programs in the areas of Sharia governance and Islamic finance.

Use of financial technology (Fintech):By adopting modern technologies such as artificial intelligence and blockchain to ensure Sharia compliance and enhance operational efficiency.

Corporate and Sharia governance are essential elements for the success and sustainability of Islamic banks, ensuring transparency and accountability and enhancing customer and investor confidence. Despite the challenges facing these banks, developing regulatory frameworks and adopting innovative solutions can contribute to improving performance and achieving economic and social goals in accordance with Sharia principles.

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