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The study aims to critically review the Shariah governance framework for Islamic banking prevailing in Pakistan and provide a comparison with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).

It analyzes 16 circulars issued by the State Bank of Pakistan (SBP) since 2002, including three Shariah governance frameworks in 2014, 2015 and 2018. Additionally, the study compares the SBP and AAOIFI Shariah governance standards to evaluate the soundness of the SBP framework against international benchmarks.

Pakistan’s Shariah governance model is centralized, with the SBP’s Shariah board having ultimate authority. The SBP has provided a comprehensive Shariah framework, which includes among others, the criteria for the qualifications and conflict of interests of Shariah members. Both AAOIFI and SBP Shariah governance frameworks have similarities and differences in terms of the tenure of Shariah Supervisory Board (SSB) members, reporting line of SSB, number of SSB meetings, minimum experience of SSB members, primary duties of Shariah board, code of ethics and conduct for SSB and management and requirement of publication of SSB report in the annual report of Islamic banks. The frameworks differ in terms of the delegation of SSB powers, assessment and appraisal of SSB effectiveness and outsourcing of Shariah Compliance Department and Internal Shariah Audit Unit.

The study recommends expanding the qualification criteria for Shariah advisors to include additional degrees and qualifications, upholding stringent criteria for conflict of interests and promoting stakeholder consultation through exposure drafts.

To the best of the authors’ knowledge, this is the first of its kind which critically review and compare the Shariah governance framework prevailing in Pakistan.

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.

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.

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.

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.

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.

This paper aims to discuss the different practices and regulatory frameworks of Shariah supervision in Islamic Financial Institutions (IFIs) across Organisation of Islamic Cooperation (OIC) member states and to identify the gaps in current Shariah supervisory practices. Parallel with the rapid growth of Islamic finance worldwide, corporate governance has received a considerable amount of attention in Islamic finance. Shariah is a unique characteristic of Islamic finance. That is why the need for a good and efficient Shariah governance system for IFIs is considered to be a crucial requirement to ensure the development and the stability of the Islamic finance industry.

The paper is based on critical review of current laws and regulations for IFIs; this provides a reflective synthesis on the practical work of the Shariah supervisory system across the 25 different OIC member states.

The paper reveals several findings. First, the authors observe a weak and poor Shariah supervisory system in most OIC member states. Furthermore, the authors detect various gaps in the current Shariah supervisory practices. Most of these shortfalls are linked to the current regulatory frameworks: the roles and the responsibilities of the national Shariah authority, and the institutional Shariah board’s duties and attributes.

This paper’s originality and value lies in its critical review of current Shariah supervisory practices across 25 OIC member states. Also, the paper puts forward various suggestions to the regulatory authorities and to the Islamic Financial Services Board to enhance the Shariah governance system and to standardize the different practices of Shariah governance worldwide.

This study aims to scrutinize the modus operandi of global financial frauds in Islamic financial institutions and assesses whether those frauds can be prevented using High Standards of Shariah Governance.

A qualitative research methodology is deployed to conduct this study by analyzing and scrutinizing academic journals, reports, regulatory guidelines and articles.

The findings in this study show that the modus operandi ranges from bribery, forged documents, unlawful profiteering, credit limit allowance ignorance, Ponzi scheme, culprit collaboration from inside and outside the banks. This paper also argues that the centralized and high-standard Shariah governance framework better prevents fraud by providing better Shariah supervision and risk management measures.

The observations in this study are limited to financial fraud at Islamic financial institutions that happened in the 21st century with more than $100m in financial loss or penalty.

This study may contribute significantly by providing insight for regulators to strengthen the Shariah governance framework in their respective countries. It also benefits Islamic financial institutions by enhancing their capacity to anticipate future financial fraud.

The aim of this paper is to review the different steps of development of Shariah governance system and to discuss the different practices of Shariah governance in Islamic financial institutions internationally.

The paper has a particular focus on the other contributions of relevant literature and existing laws and regulations for Islamic financial institutions which provides a reflective synthesis on practical work of Shariah governance system across different jurisdictions.

The main attention of this paper is Islamic financial institutions and a key issue arising is that the typical structure, functions, duties and responsibilities are different from country to country.

The paper put forward various suggestions to the regulatory authorities and to the Islamic Financial Services Board to enhance the Shariah governance system and to standardize the different practices of Shariah governance worldwide.

The originality and the value of the paper lie in its critical review of current Shariah governance practices worldwide. As well, some key issues pertaining to Shariah governance in Islamic financial institutions are addressed to encourage further investigation by academics and practitioners in the field.

The purpose of this paper is to explore the Shariah governance practices of Islamic fund management companies (IFMCs) in Malaysia, with the principal goal of reviewing the need for a comprehensive Shariah governance framework for the Islamic fund management industry.

The study was conducted using a qualitative approach via 14 semi-structured interviews with three companies (i.e. Company A, Company B and Company C) involving face-to-face interviews, telephone interviews and emails. Data from the interviews were recorded and later analysed using content analysis.

The study finds that Shariah governance processes among the IFMC examined are well-managed; and the current regulations issued by the regulators are sufficient to ensure the Shariah compliance of Islamic fund management industry. In spite of the absence of a comprehensive Shariah governance framework for the industry, most Shariah functions (i.e. Shariah risk management, Shariah review and Shariah audit) are performed by the parent company, except for Shariah research. Nevertheless, Shariah research is not an important function in Islamic fund management because the investment instruments are generally selected from a predetermined list of Shariah-compliant investment options.

The study offers an overview of Shariah governance practices in the Islamic fund management industry to policymakers and practitioners for the future development of Shariah governance practices among IFMC.

This is the first paper to study Shariah governance practices in the Islamic fund management industry in Malaysia.

An Islamic social finance ecosystem has its specific instruments in terms of funding and investment that are in line with Shariah (Islamic law) principles. These include waqf (Islamic endowment), zakat (compulsory alms), ṣadaqah (donation), qarḍ ḥasan (benevolent loan) and others. In this context, the Islamic financial institutions can be considered as Islamic social finance institutions since it has the elements of Islamic social finance concepts. The uniqueness of these two types of institutions is that they operate with the absence of riba, maysir, gharar and thus the requirement of Shariah governance comes into existence. The practice of Shariah governance in Islamic financial institutions needs to be extensively examined by using a comprehensive measurement. Therefore, this chapter attempts to discuss on the needs of Shariah Governance Practices Index (SGPi) as a comprehensive measurement to measure the Shariah governance practices. In conclusion, it is proposed to have a comprehensive index to measure the Shariah governance practices which consider few components of Shariah governance such as the board of directors, the management, Shariah Committee and Shariah compliance functions.

This study aims to examine diversity in the composition of Shariah supervisory boards (SSBs) of Islamic banks (IBs). It investigates diversity from two perspectives: existing composition of SSBs and the regulatory frameworks and standards of selected Organisation of Islamic Cooperation countries. Diversity characteristics include education, nationality, gender and age.

A list of all full-fledged Islamic commercial banks (FFICBs) globally has been carefully prepared and confirmed. Conventional banks with Islamic windows, non-commercial banks, takaful companies and other Islamic financial institutions are excluded. The available profiles of 428 SSB members have been scrutinised and analysed. These board members occupy 522 SSB positions in 238 FFICBs operating in 52 countries around the globe. From the regulatory perspective, 12 national and international Shariah governance frameworks and standards have been examined.

Findings of this paper indicate various levels of diversity in SSBs of the reviewed IBs. The level of diversity in educational background and in the nationality of SSBs can be described as generally acceptable. However, a lack of diversity in gender and age among SSB members is evidently observed in IBs. While the lack of age diversity in SSBs may be relatively justified as a common trend in the composition of corporate boards, SSBs of IBs are seriously lagging behind in gender diversity. On the regulatory level, this study concluded that provisions on diversity as a requirement in SSBs are almost non-existent in the existing regulatory frameworks and standards.

The major limitation of this study is the lack of available information on the SSB members.

This paper provides insights for IBs and policymakers concerned with the corporate governance of IBs and all Islamic financial institutions. First, it offers an excellent bird’s-eye view of the status of diversity in SSBs of IBs. Second, it motivates policymakers and standard-setting bodies to ensure, through the relevant regulatory frameworks, adequate levels of diversity in the composition of SSBs. Diversity in SSBs of IBs and Islamic financial institutions should be given special emphasis, not only in boards and top management positions but also in the workplace. This is of profound significance to the reputation of Islamic finance industry which has been recently under mounting pressure to translate the rhetoric about the Islamic finance industry being ethical, fair, just, equitable and inclusive into genuine implementations.

To the best of the authors’ knowledge, this study is the first of its kind to examine the diversity of SSB members from the regulatory as well as from the implementation perspective.

The purpose of this study is to examine the level of Shariah governance disclosure among Islamic banks in Malaysia and the Gulf Cooperation Council (GCC) countries (i.e. Kuwait, Bahrain, United Arab Emirates, Qatar, Oman and Saudi Arabia). On top of that, the effect of Shariah governance disclosure on Islamic banks financial performance is investigated.

Data underwent quantitative content analysis and a mean comparison of the Shariah governance disclosure mechanisms as well as multiple regression analysis. Shariah governance information is obtained from the Islamic banks' official websites and the Bursa Malaysia Exchange.

The results of the content analysis revealed that the level of Shariah governance disclosure among Malaysian Islamic banks has been more pronounced than in the GCC countries. Additionally, the multiple regression analysis results specified that of the five Shariah governance disclosure mechanisms, the Shariah committee emerged as the strongest determinant in the financial performance of the Islamic banks, followed by transparency and disclosure.

Islamic banks should emphasise publishing Shariah governance information in annual reports to reflect superior accounting practices as assessed by certified Shariah auditors with an effective monitoring system.

The empirical findings are vital for serving as a guideline for Islamic banks in Malaysia and the GCC countries to disclose their practice of Shariah governance and gain empirical insights into its effect on firms’ financial performance. Following that, Islamic banks would improve their accounting practices while adhering to Shariah principles, strengthen internal controls and boost their brand reputation.

This study aims to investigate the relationship between Islamic governance and the social performance of Islamic banks, pioneering a new aspect in terms of the impact of the National Shariah Board (NSB) on the social performance of Islamic banks. The essential body in the Islamic banks in charge of Islamic governance is the Shariah Supervisory Board (SSB). Therefore, in this study, the authors explore how the characteristics of the Shariah board and Islamic governance mechanisms influence the social performance of Islamic banks.

Panel data methods are applied to the annual data of 43 banks from 14 countries over the period 2012–2018 to explore the impact of Islamic governance on Islamic banks’ social performance. The authors have used all available bank annual reports in the given period. Social performance is measured by Maqasid al-Shariah (in terms of the goals of the Islamic moral economy) index using a comprehensive evaluation framework. Islamic governance is represented by the improved Islamic Governance Score (IG-Score) index, which measures the quality of Islamic governance in Islamic banks. In the research, the authors also introduce the frequency of SSB meetings in IG-Score.

The findings suggest a strong link between Islamic governance and the social performance of Islamic banks, illustrating the importance of the Shariah board in achieving maqasid. On the other hand, the research discovered that NSBs are inefficient and the existence of NSB can jeopardize the social performance of Islamic banks. The results of this research imply valuable recommendations for Islamic banks that are keen to improve their social performance.

Besides investigating the impact of SSB governance on the social performance of Islamic banks by using an improved IG score index, to the best of the authors’ knowledge, this is the first study that investigates the impact of NSBs on the social performance of Islamic banks.