Sharī‘ah risk and corporate governance of Islamic banks

Karim Ginena (Senior Researcher based at Hamad Bin Khalifa University, Doha, Qatar)

Corporate Governance

ISSN: 1472-0701

Publication date: 28 January 2014



The purpose of this paper is to help directors, senior management, and stakeholders of Islamic banks understand sharī‘ah risk, a crucial consideration in the corporate governance of Islamic banks, and its impact on these banks.


This conceptual paper links dispersed insights drawn from the emerging body of sharī‘ah governance literature, and the guidance issued by the Basel Committee on Banking Supervision (BCBS), the Islamic Financial Services Board (IFSB), and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) with new insights to clarify the sharī‘ah risk that Islamic banks face.


Sharī‘ah risk, an operational risk, poses a credible hazard to Islamic banks and their stakeholders. Possible consequences of sharī‘ah non-compliance include higher costs, financial losses, liquidity problems, bank runs, bank failure, industry smearing and financial instability. This study defines shariah risk, identifies credit, legal, compliance, market, and reputational risk that it may evoke, and categorizes its causes and events.

Research limitations/implications

Future research could empirically test the ideas posited. In this paper claims were substantiated by logic and examples.

Practical implications

The study devises an instrument for assessing sharī‘ah risk, and suggests measures for directors, senior management, and regulators to mitigate this risk.


This is the first study to focus on the implications of sharī‘ah risk, delineate examples of events and incorporate them within the BCBS operational risk causes, and develop a tool for measuring sharī‘ah risk.



Ginena, K. (2014), "Sharī‘ah risk and corporate governance of Islamic banks", Corporate Governance, Vol. 14 No. 1, pp. 86-103.

Download as .RIS



Emerald Group Publishing Limited

Copyright © 2014, Authors

Please note you might not have access to this content

You may be able to access this content by login via Shibboleth, Open Athens or with your Emerald account.
If you would like to contact us about accessing this content, click the button and fill out the form.
To rent this content from Deepdyve, please click the button.