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Open Access
Article
Publication date: 4 January 2022

Md. Kausar Alam, Abu Umar Faruq Ahmad, Aishath Muneeza, Mosab I. Tabash and Md Adnan Rahman

Sharīʿah Secretariat plays a significant role in assisting Sharīʿah Supervisory Boards (SSBs) in their role in achieving Sharīʿah compliance in Islamic banks (IBs). The key…

Abstract

Purpose

Sharīʿah Secretariat plays a significant role in assisting Sharīʿah Supervisory Boards (SSBs) in their role in achieving Sharīʿah compliance in Islamic banks (IBs). The key objective of the study is to develop a organizational framework of the Sharīʿah Secretariat for the IBs in Bangladesh.

Design/methodology/approach

The study applied qualitative case study research. The data have been collected from 17 respondents through semi-structured interviews from IBs and professional experts in Bangladesh.

Findings

This study proposes a full-time Sharīʿah Secretariat and several departments for further enhancement of the Sharīʿah functions in IBs in Bangladesh. The framework proposed in this study covers the formation, functions, composition, qualification, reporting line, independence, remuneration and terms of appointment of the Sharīʿah Secretariat to set a uniform benchmark for all IBs in Bangladesh. It is anticipated that the outcomes of this research will assist to further strengthen the Sharīʿah governance of IBs in Bangladesh.

Research limitations/implications

This research contributed to the national and global regulatory authorities and IBs by proposing a Sharīʿah Secretariat framework for the smooth functioning of the IBs in Bangladesh. The framework proposed in this study covers the formation, functions, composition, qualification, reporting line, independence, remuneration and terms of appointment of Sharīʿah Secretariat.

Originality/value

This study proposed a framework which is considered the first organizational framework so far for the Sharīʿah Secretariat of IBs in Bangladesh. IBs can apply this proposed framework to form their Sharīʿah Secretariat structure.

Details

ISRA International Journal of Islamic Finance, vol. 14 no. 1
Type: Research Article
ISSN: 0128-1976

Keywords

Article
Publication date: 12 July 2021

Md. Kausar Alam, Md. Mizanur Rahman, Fakir Tajul Islam, Babatunji Samuel Adedeji, Md. Abdul Mannan and Mohammad Sahabuddin

The purpose of this study is to explore the practices of Shariah governance (SG) systems in terms of their guidelines, current operational procedures, internbal policies and…

Abstract

Purpose

The purpose of this study is to explore the practices of Shariah governance (SG) systems in terms of their guidelines, current operational procedures, internbal policies and structures and regulatory framework of Islamic banks in Bangladesh from the viewpoints of Shariah, Tawhidic approach/ontological approach and Shuratic process of Islamic corporate governance and institutional theory.

Design/methodology/approach

A semi-structured interview tactic has been applied to attain the objective. Overall, data has been collected from the regulators, Shariah supervisory board members, Shariah department executives and experts from the central bank and Islamic banks of Bangladesh.

Findings

The study finds that Islamic banks do not follow complete Shariah principles in all aspects of SG nor violate them fully in their overall functions due to less accountability, which contradicts the concept of the Tawhidi epistemological process of Islamic corporate governance. Islamic banks announce that they are following Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) guidelines, but in practice, they do not follow the instructions accurately because all of the standards and policies of AAOIFI and the Islamic Financial Services Board are not applicable in Bangladesh due to its cultural, legal and regulatory structures. It is found that Islamic banks in Bangladesh have a lower practice of maqasid as-Shariah and Tawhidic approach and Shuratic process.

Research limitations/implications

The study significantly contributed to the central bank of Bangladesh and Islamic banks by exploring the SG systems for their further enhancement. The research provides some suggestions for improving existing SG systems and enhancing more application of SG guidelines and Shariah principles in the overall operations of the Islamic banks in Bangladesh.

Originality/value

This research extends the literature regarding the Islamic banks’ SG practices in Bangladesh. The study also contributes to Shariah, Tawhidic approach/ontological approach and Shuratic process of Islamic corporate governance and institutional theory by exploring the Islamic banks’ existing SG practices in Bangladesh.

Details

Pacific Accounting Review, vol. 33 no. 4
Type: Research Article
ISSN: 0114-0582

Keywords

Open Access
Article
Publication date: 28 June 2022

Md. Kausar Alam, Mosab I. Tabash, Oli Ahad Thakur, Md. Mizanur Rahman, M. Naim Siddiquii and Safiqul Hasan

The study aims to examine the independence and effectiveness of the Shariah department officers of the Islamic banks in Bangladesh as the Shariah supervisory board (SSB) provides…

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Abstract

Purpose

The study aims to examine the independence and effectiveness of the Shariah department officers of the Islamic banks in Bangladesh as the Shariah supervisory board (SSB) provides the annual Shariah report and Shariah resolutions based on the reports of the Shariah department officers.

Design/methodology/approach

The study applied a qualitative case study to achieve the research objectives. Data were collected through face-to-face interviews with the regulators, Shariah supervisory boards, Shariah department executives, and experts from the central bank and Islamic banks of Bangladesh.

Findings

The study illustrates that Shariah department officers/Shariah officers in Bangladesh seem to lack independence and decision-making authority in accomplishing ex-post Shariah governance functions (i.e. Shariah audit, Shariah compliance and Shariah review) as well as ensuring Shariah compliance. The Shariah officers cannot work spontaneously on practical issues without any interference. The Shariah officers also have to answer to the management regarding their Shariah functions and are not allowed to come up with any opinions without the authority’s authorization.

Research limitations/implications

The study has significant contributions to the central bank and Islamic banks in Bangladesh. This research suggests that regulators, SSB, and Islamic banks should focus on ensuring Shariah compliance and protecting the independence of Shariah department officers as they are mainly related to practical monitoring of Shariah issues. It also suggests that Shariah department officers should directly report to SSB rather than the management regarding Shariah’s compliance and audit issues.

Originality/value

This study is unique in the context of Bangladesh and the global context as a whole for Shariah department officers.

Details

Asian Journal of Accounting Research, vol. 8 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Open Access
Article
Publication date: 9 March 2021

Md. Kausar Alam, Mohammad Mizanur Rahman, Mahfuza Kamal Runy, Babatunji Samuel Adedeji and Md. Farjin Hassan

The purpose of this paper is to examine the influences of Shariah governance (SG) mechanisms on Islamic banks' performance and Shariah compliance quality in the context of…

7542

Abstract

Purpose

The purpose of this paper is to examine the influences of Shariah governance (SG) mechanisms on Islamic banks' performance and Shariah compliance quality in the context of Bangladesh.

Design/methodology/approach

A semi-structured personal interview tactic was applied to accomplish the research objectives. The data were collected from the regulators, Shariah supervisory boards, Shariah department executives and Shariah experts from the Central Bank (Bangladesh Bank) and Islamic banks in Bangladesh.

Findings

The study discovers that the quality of the Board of Directors (BODs), Shariah Supervisory Board (SSB), management and Shariah executives have both positive and negative influences on the Shariah compliance quality, image, goodwill and performance of Islamic banks' in Bangladesh. The compositions, formations and quality of SSB and Shariah officers positively influence the Islamic banks' fatwas, Shariah decisions, compliance quality and firm performance. The study also finds that prevailing banking pressure, current political situation, the willingness of BOD and management and social limitations impact Islamic banks' performance, Shariah compliance quality, image and goodwill.

Research limitations/implications

Based on our findings, if the regulators, BODs and Islamic banks can manage effective and efficient executives, it will create a positive impact on Islamic banks' performance, image, goodwill and quality compliance. As the prevailing banking pressure, current political situation and social limitations hinder the functions and employment system of the Islamic banks as well as result the Islamic banks' image, performance, Shariah implementations and compliance. Thus, the theorist needs to consider these mechanisms in extending the agency, stakeholder and resource dependence theories.

Originality/value

This research extends the literature concerning the influences of Islamic banks' SG mechanisms in Bangladesh. The study also argued not only the efficient and effective mechanisms but also the prevailing banking pressure, current political situation and social limitations impact on Islamic banks' performance and Shariah compliance quality.

Details

Asian Journal of Accounting Research, vol. 7 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 20 May 2021

Md. Kausar Alam

The purpose of this paper is to focus on conceptualizing the origin of legitimacy, the legitimation process and its trustworthiness toward the people, regulators, society and…

Abstract

Purpose

The purpose of this paper is to focus on conceptualizing the origin of legitimacy, the legitimation process and its trustworthiness toward the people, regulators, society and stakeholders. In achieving the purpose of the study, an inclusive research gap concerning the roles of the Shariah Supervisory Board (SSB) as a Shariah regulatory authority or an internal mechanism of Shariah Governance Framework (SGF) in the development and formation of Islamic financial institutions (IFIs) would also be addressed.

Design/methodology/approach

The paper implements an analytical approach to investigate the legitimation process of SSB, and its presence, significance, as well as credibility to the stakeholders.

Findings

This study proposes an additional authority of legitimacy, namely, SSB/Shariah regulatory authority, along with regulators, professionals and people. These could be derived from the internal mechanism of Shariah Governance (SG) practices of IFIs. The study also proposes another type of legitimacy (ethical/Shariah legitimacy) that derives from the organizational SG practices through its internal mechanisms. The formation of SSB is mandatory and more significant for the isomorphic identification of IFIs, SG system, legitimacy and broader acceptance to stakeholders.

Research limitations/implications

The rational argument shows that SSB legitimates the overall functions of IFIs, SG practices, processes and structures. It is more apposite because it has substantial validity, dominance, recognition and acceptability along with three external bodies. Besides, IFIs and their SG do not have the proper value to the general people, society, regulators and other stakeholders without the legitimization of SSB. Thus, theorists and academicians may consider SSB as the fourth party of legitimacy along with three legitimacy providing authorities (regulators, professionals and people).

Originality/value

The paper focuses on illustrating and extending the border knowledge concerning the legitimacy from SG and how do SSBs legitimize IFIs and enhance their credibility to the general people, government, society and other stakeholders. The paper first clarified the internal legitimacy concerning SGF and contributed to the area of Islamic finance, legitimacy, institutional theory, legitimacy theory and internal legitimacy.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Open Access
Article
Publication date: 28 June 2022

Md. Kausar Alam, Mohammad Shofiqul Islam, Fakir Tajul Islam, Mosab I. Tabash, Mohammad Sahabuddin and Muhammad Alauddin

The study aims to investigate the reasons behind the growing diverse practices of Shariah governance (SG) among Islamic banks in Bangladesh.

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Abstract

Purpose

The study aims to investigate the reasons behind the growing diverse practices of Shariah governance (SG) among Islamic banks in Bangladesh.

Design/methodology/approach

Data has been collected through a semi-structured interview process from the concerned authorities (Shariah supervisory board members, Shariah department officers, central bank executives and banking professional experts) related to SG and Islamic banks in Bangladesh. The data has been analyzed by NVivo software.

Findings

The results of the study show that SG mechanisms are different due to the lack of unique comprehensive SG guidelines and the absence of a Centralized Shariah Supervisory Board (CSSB) under the Central Bank. The self-developed practices, the diversified opinions and viewpoints of the Board of Directors (BOD), banks' policies, business motivations and profit intention are also responsible for diversified SG practices. The diverse understandings and explanations of Shariah, Madhab (school of thought) and rulings are also responsible for the different practices of SG in Bangladesh.

Research limitations/implications

The study has unique implications for the regulatory authorities and Islamic banks in Bangladesh. The study explored the diverse reasons for numerous applications of SG guidelines which will be beneficial for the central bank and regulators to resolve the issues by outlying unique SG guidelines.

Originality/value

This study outlines the reasons for dissimilar practices of SG by the Islamic banks in Bangladesh, which will be beneficial for Islamic banks and the central bank of Bangladesh.

Details

Asian Journal of Accounting Research, vol. 7 no. 3
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 17 December 2021

Md. Kausar Alam

The purpose of this study is to propose a centralized Shariah governance framework (CSGF) for the Islamic banks and Shariah governance in Bangladesh as such, the existence and…

Abstract

Purpose

The purpose of this study is to propose a centralized Shariah governance framework (CSGF) for the Islamic banks and Shariah governance in Bangladesh as such, the existence and practices of the Shariah governance framework (SGF) are decentralized and diversified.

Design/methodology/approach

The paper implements a qualitative case study approach to develop a CSGF for the Islamic banks in Bangladesh. The data has been collected from 17 respondents through semi-structured interviews with a combination of regulators, Shariah supervisory board members, Shariah department executives and Shariah experts from the central bank and Islamic banks in Bangladesh.

Findings

This study proposes a CSGF which is comprising two-tier Shariah supervisory boards (SSBs), i.e. institutional SSB and centralized Shariah supervisory board (CSSB) under the central bank to monitor the overall functions of SG. The study recommends the setting up of four departments under the central bank to enhance the functions of CSSB. Besides, the central bank can introduce Shariah rating, external Shariah audit and external Shariah review through Islamic rating agencies and Islamic Chartered Accountant Firms for transparency and quality compliance which are more desired from the public and other stakeholders.

Research limitations/implications

The study significantly contributed to the national and global regulatory bodies by providing a structural CSGF for the Islamic banks to perform their functions and activities smoothly.

Practical implications

The study outlines a CSGF for the Islamic banks in Bangladesh as the existing practices are diversified and decentralized. Therefore, this framework would be helpful for the central bank and Islamic banks in Bangladesh to promote unique practices of the SGF.

Originality/value

This is the first research that provides a structure of CSGF for Islamic banks in Bangladesh, while the central bank of Malaysia developed the first SGF. There is no study concerning the demographic figure of CSGF of Islamic banks in the entire literature.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 10 February 2021

Md. Kausar Alam, Suhaimi Ab Rahman, Mosab I. Tabash, Oli Ahad Thakur and Sharif Hosen

The main aim of this research is to ascertain the expected duties and performed roles and functions of the Shariah supervisory boards (SSBs) of Islamic banks in Bangladesh.

Abstract

Purpose

The main aim of this research is to ascertain the expected duties and performed roles and functions of the Shariah supervisory boards (SSBs) of Islamic banks in Bangladesh.

Design/methodology/approach

A semistructured face-to-face interview was applied to accomplish the research objectives. In total, data was collected from 17 respondents with a combination of regulators, SSBs, Shariah department executives and experts from the central bank and Islamic banks in Bangladesh.

Findings

This study finds that the expectations of Islamic banks toward SSB members are to provide opinions on Shariah issues, guidelines and decisions regarding the modern banking, practices and delivering of fatwas on the contemporary issues offered by the management to fulfill the demand of the numerous stakeholders. In addition, they can develop Shariah governance (SG) policies and implement those guidelines, approve and develop new products, observe and monitor banking functions, identify problems and outline solutions as well as they should ensure Shariah principles and compliance. The SSBs members perform roles and functions in monitoring and reviewing overall banking activities and functions; reviewing products, services and contracts; preparing SG guidelines; ensuring Shariah principles and compliance; providing opinions on existing SG practices and finally, delivering Shariah resolutions on the overall functions.

Research limitations/implications

This study significantly contributed to the national regulatory bodies by providing suggestions that the existing SG system should be improved to enhance the overall monitoring of SSB and ensure more Shariah compliance in the overall operations of the Islamic banks in Bangladesh.

Originality/value

This is the first research to the best of authors’ knowledge that explores the expected duties and performed roles and functions of the Islamic banks concerning Bangladesh. This study also contributes to the agency, legitimacy and stakeholder theories by outlining the expected and performed roles of SSBs to the Islamic banks and stakeholders.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 22 March 2023

Md. Kausar Alam, Abu Umar Faruq Ahmad, Mezbah Uddin Ahmed and Md. Salah Uddin

The study explores the existing Shariah audit practice of Islamic banks (IBs) in Bangladesh aiming at providing suggestions for improvements on the detected shortfalls in the…

Abstract

Purpose

The study explores the existing Shariah audit practice of Islamic banks (IBs) in Bangladesh aiming at providing suggestions for improvements on the detected shortfalls in the relevant areas.

Design/methodology/approach

This research applied a qualitative method, and data were collected through conducting semi-structured interviews in Bangladesh. A total of 17 interviews were conducted for accomplishing the research objectives.

Findings

The study finds that there is no comprehensive Shariah audit manual in the current operation for IBs in Bangladesh, and as such, the requirements of their Shariah compliance remain a big question. Although the Shariah audit is conducted within IBs, and the Shariah audit officers or Shariah officers inspect necessary documents while conducting the Shariah audit, they only cover 10–20% of total investments and transactions. Based on the findings of this study, it is recommended that the Shariah auditing tasks should broadly cover at least 80% of the investment portfolios, documents and financial contracts and activities.

Research limitations/implications

The findings of this research are expected to significantly contribute to the regulatory authorities concerned in Bangladesh and beyond, which include the suggestions that IBs can adopt to strengthen their Shariah governance system. The study also pinpoints that in the current system, Shariah auditors' roles are somehow limited in examining and checking the investment sides with a minimal portion (10–20%), for which they are unable to perform their responsibilities in a befitting manner to provide assurance services and overall Shariah compliance of IBs activities.

Practical implications

This study explores the current Shariah audit systems and provides recommendations to improve the existing systems which will be beneficial for Islamic banks of Bangladesh.

Originality/value

To the researchers' knowledge, perhaps this is the first research of its kind which seeks to explore the current Shariah audit practice in Bangladesh qualitatively, and it provides some practical suggestions for making the necessary developments of the current audit process of IBs. In addition, there are no empirical studies in the entire Emerald insight publishers and Scopus database regarding Shariah audit practices. The study contributes to the agency, stakeholder and legitimacy theories by exploring the Shariah audit of IBs.

Details

Journal of Applied Accounting Research, vol. 24 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

Open Access
Article
Publication date: 7 October 2020

Yusuf Karbhari, Md. Kausar Alam and Md. Mizanur Rahman

Prior studies on Islamic finance provide a limited linkage between organizational theory and the complex Shariah governance framework embraced by Islamic banks worldwide. This…

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Abstract

Purpose

Prior studies on Islamic finance provide a limited linkage between organizational theory and the complex Shariah governance framework embraced by Islamic banks worldwide. This paper aims to show the relevance of the application of “institutional theory” in the Shariah governance framework of Islamic banks.

Design/methodology/approach

This study applied library research to investigate the application of institutional theory in the Shariah governance framework of Islamic banks. The authors also critically reviewed prior empirical and review papers for accomplishing the research objectives.

Findings

Based on the critical review, the authors found that institutional theory is the most influential in progressing Shariah governance as it contributes toward the organizational image, helps to achieve religious legitimacy, and inspires a more robust regulatory environment. In addition, a well-designed Shariah governance framework is driven by institutional theory and that could assist in providing guidelines, strategies and procedures for Islamic banks to better conduct; monitor and control their social, religious and accountability obligations. The authors also highlighted the societal, economic and legal environment of Islamic banks in relation to the propositions of institutional theory. They emphasize that a well-designed Shariah governance framework driven by institutional theory could assist in providing guidelines, strategies and procedures for Islamic banks to better conduct, monitor and control their social, religious and accountability obligations.

Research limitations/implications

This study highlights institutional theory to serve best the development of operational strategies and structures of Islamic banks including the roles, functions and powers of the various stakeholders including regulators and those involved in the Shariah governance process of Islamic banks. The authors recognize the institutional theory to perform a key role in enriching the structural framework of Islamic Financial Institutions. This study is heavily dependent on prior research rather than empirical investigations. The authors did not cover other Islamic finance areas (such as Islamic insurance, Islamic microfinance and Halal industries). Thus, future researchers can apply institutional theory in Shariah governance practices and implementations of setting up rules by the regulators and respective institutions.

Originality/value

To the best of the authors’ knowledge, this is the first study that attempts to show the importance of the application of institutional theory in Shariah governance of Islamic Banks. Thus, this study, therefore, adding a novel dimension to the literature by arguing why institutional theory, is more pronounced (as compared to the other theoretical frameworks) in the formation and discharge of the roles, powers and functions by the different governance organs (such as regulators, the board of directors, management and Shariah supervisory board) operating in this unique corporate governance landscape.

Details

PSU Research Review, vol. 5 no. 1
Type: Research Article
ISSN: 2399-1747

Keywords

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