COMPARATIVE SHARI’AH GOVERNANCE FRAMEWORK IN SELECTED MUSLIM COUNTRIES

Abstract

Shari’ah compliance is the fundamental distinguishing feature
between conventional and Islamic financial system. If Islamic
financial institutions do not comply by the rules prescribed in
Shari’ah, then there is no difference between conventional and
Islamic financial institutions. Due to the paramount importance of
Shari’ah compliance, regulatory authorities and Islamic financial
institutions should focus on the Shari’ah governance framework.
Different countries follow different Shari’ah governance framework,
but everyone agrees with the importance of Shari’ah compliance and
Shari’ah governance framework. This paper focuses on the
cross-country comparison of different frameworks of Shari’ah
governance namely Pakistan, Malaysia, Turkey, Indonesia and
Kingdom of Saudi Arabia. These five Muslim countries are selected
on the basis of growing focus of the governments on Islamic finance
and penetration of Islamic finance in the current financial system.
This paper is based on qualitative research and uses secondary
sources of data. The objective is to show that the Shari’ah
governance frameworks implemented by central banks in different
countries varies from country to country and all the regulatory
authorities have designed Shari’ah governance framework for the
Islamic financial institutions. Some countries have a very rigorous
and strong Shari’ah governance framework like Malaysia and
Pakistan. Whereas the new entrants in Islamic finance industry like
Turkey is focusing on establishing a strong and resilient Shari’ah
governance framework. The research shows that there is need for
continuous improvement of the Shari’ah governance framework
across the countries. There is demand for a standardized Shari’ah
governance framework across the world but there are several
challenges in order to establish a unified Shari’ah governance
framework for Islamic financial institutions across the world.