The Sixth Islamic Finance Conference was held by the Iranian Association of Islamic Finance on December 16, 2020 via a webinar. Financial market activists and those interested in Islamic financial topics participated in the webinar.
As a part of this webinar's agenda, the topic of “Good Governance and its Impact on Financial Markets: The Shariah Perspective” was discussed by Dr. Mohamad Akram Laldin the executive director of International Shariah Research Academy for Islamic Finance (ISRA).
It was kicked off with defining Corporate Governance to translate the wishes of an organizational owners into organizational performance. Then Dr. Laldin added, Islamic finance observes all the standards of conventional finance such as transparency, accountability, stability, growth, and so on. Above all, the Islamic values and Shariah requirements are unique to Islamic finance.
Considering the Corporate Governance in Islamic financial institutions, he stated there are certain guidelines: code of conduct, infrastructure, due diligence, communication, internal control, monitoring and enforcemen. Of course there are some roles which are served for governance such as the regulators, board of directors, different committees and management observation. Above all, when it comes to Islamic finance there will be the Shariah Supervisory Board and the internal Shariah Unit. These two organs are to ensure that all the Shariah aspects of the operation are in compliance with the requirements of the Shariah.
Then, he defined Shariah Governance according to IFSB-10 Guiding as a set of institutional and organizational arrangements in which Islamic financial institutions ensure that there is an effective independent observation of Shariah compliance over the issuance of relevant Shariah pronouncements, dissemination of information and an internal Shariah compliance review. Regarding the significance of Shariah Governance, he mentioned some of its goals such as; blessing of Allah, stability and growth, confidence and trust and legitimacy of products.
Furthermore, Dr. Laldin explored Shariah compliance practices and bodies in selected countries. For example, in Malaysia in order to harmonize and streamline the views of Shariah scholars there is a centralized body to look at the whole industry, which is Shariah Advisory Council that has been established by law in the Central Bank of Malaysia. He added, on the whole. whenever there is any non-compliance event there is a huge risk not only to the institution but also to the industry. Consequently, the Central Bank of Malaysia has quite severe enforcement and remedial action against Shariah non-compliance events according to the Islamic Financial Services Act (IFSA). IFSA has strengthened Shariah compliance requirements in Malaysia, and Islamic banks need to report on non-compliance, cease the non-compliance business and submit rectification within 30 days. Accordingly, if there is satisfactory evidence proving the Shariah non-compliance on the path of an institution then BNM can either enforce monetary penalty, civil penalty not more than 25 million RM, indemnity etc. on the board of directors, management as well as the Shariah committee of the relevant institution.
This section of Sixth Islamic Financial Conference ended with highlighting the role of robust Shariah Governance in assisting the growth of industry, raising the confidence level of the people and makeing the market more prosperous.
To access the recorded video of this webinar click on the following link:
https://www.aparat.com/v/0LmDg