Shariah Governance for Islamic Financial Institutions in Malaysia on the Independency of Shariah Committee and Efficiency of Its Shariah Decisions

摘要

Shariah governance for Islamic Financial Institutions (IFIs) in Malaysia is governed by the Shariah Governance Framework for the Islamic Financial Institutions 2010 (SGF 2010) that was developed and introduced by Central Bank of Malaysia (CBM) [1]. SGF 2010 provides that Shariah Committee as an internal Shariah advisory body formed in each respective Islamic financial institution (IFF) is important to ensure the overall Islamic financial practices of such institution operate in accordance with the Shariah principles. Similarly, SGF 2010 provides a comprehensive guidance to the Shariah Committee in discharging its duties and responsibilities in matters relating to Shariah. To ensure that all of its duties and responsibilities are carried out accordingly, Shariah Committee must be independent. Its independency shall be observed at all times while exercising its duties and responsibilities. To ensure Shariah Committee independency, the Board of Directors (Board) needs to be notified on the minutes of Shariah Committee meetings. The Shariah Committee shall also have access to accurate, timely and complete information from the management. Its independency requires the findings of Shariah audit and Shariah review to be tabled before the Shariah Committee members for their comments and endorsements. In a situation where the Shariah Committee has reasons to believe that the IFI has been carrying on Shariah non-compliant activities, the Shariah Committee shall inform the Board and recommend suitable measures to rectify the situation. Independency of Shariah Committee leads to the efficiency of Shariah Committee decisions made during the Shariah Committee meetings. In order to facilitate the Shariah Committee members' decisions, they shall be given the necessary access to files, records, draft materials and conversations, including those categorised as confidential, so long as the information is related to the work undertaken by the Committee. This means that Shariah Committee needs to be given sufficient information, and full disclosure and transparency on all issues during meetings. Not only that, to facilitate and reach good decisions, Shariah research needs to be carried out by the Shariah research officers of the IFI to facilitate Shariah decisions and research conducted by the Shariah research officers would assist the Shariah Committee to reach good decisions.