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11 US-China L. Rev. 112 (2014)
Shariah Governance in Islamic Financial Institution: An Appraisal

handle is hein.journals/uschinalrw11 and id is 112 raw text is: SHARIAH GOVERNANCE IN ISLAMIC FINANCIAL INSTITUTION: AN APPRAISAL Abdurrahman Raden Aji Haqqi* With the fast and huge growth and development of Islamic financial institutions, after only four decades, their operation is in the need of continuous improvement and effort of enhancement. Islamic financial system is a combination of innovation and tradition, of ancient values and a vibrant forward-looking design, that says much about the current state of confidence around the world and about the state of the financial services industry, and its potential to contribute not only to the Islamic, but to the non-Islamic world. The base line for any discussion of Islamic financial services is their obvious commercial success. People want them. It is true that Islamic finance is still small compared with the whole globalfinancial system, but the sector is growing fast, as it is illustrated by the fact that total assets in Islamic banks in the world increased by an average of 24% a year. Nor is the market restricted to the Islamic world. Freddie Mac, the US mortgage lending corporation, has been offering mortgage backed- securities as a financing option to the Muslim community in the United States. In London, Europe ' first stand-alone Islamic bank opened its doors for business in September 2005. Before that, one of the UK's biggest retail banks had announced the launch of a Shariah compatible account, claiming that it would make Islamic banking mainstream . Harmonized Shariah Governance rules like its counterpart in corporate governance rules are needed to assure high level playing field to improve transparency and enhance the trust. Shariah Governance plays a key role in ensuring the effective functioning of Islamic financial market and promoting the integrity ofIslamic financial market. This paper is an attempt to demonstrate that a unification-based approach of Islamic legal system and convention is required. For this purpose, it will discuss Shariah Governance reforms that have been recently implemented orproposed. IN TR O D U C TIO N ............................................................................................ 113 I. CORPORATE GOVERNANCE: A M UST? ..................................................... 114 II. SHARIAH GOVERNANCE: A CONCEPT ..................................................... 118 III. W HY SHARIAH GOVERNANCE? ............................................................. 121 IV. SHARIAH GOVERNANCE: FOUR PILLARS ............................................... 124 A. M anagement and Supervision ........................................................ 124 B. Shariah Advisory Board ................................................................ 125 C. Shariah Compliance and Review ................................................... 125 Senior Lecturer, Deputy Dean, Faculty of Shariah and Law, Sultan Sharif Ali Islamic University, Brunei Darussalam.

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