The control of the Shari'a Supervisory Board in the Islamic financial institutions

This study aims to understand the role of Sharia Supervisors in the private Zakat Institution (LAZ) as well as other aspects of sharia compliance, such as Zakat fatwa on the perspective of Zakat officers. According to Decree of the Minister of Religion Number 333 / 2015 that LAZ as register must have a sharia supervisor. Sharia compliance of an institution could rely on the role of the sharia supervisory board (SSB). Some literature discussing this topic is still dominated study on Islamic financial institutions (IFIs), especially in Islamic Banks. Therefore this article will contribute to the body of knowledge, especially in the zakat literature. Data were gathered from five presiding officers of private zakat institutions in one province in Indonesia which consists of three presiding officers from provincial LAZ representative and two presiding officers from LAZ district. The study found that Sharia compliance in LAZ had many weaknesses such as lack of sharia control by sharia supervisors, a member of the sharia supervisory board who does not follow the latest issues about Zakat or the absence of competency requirements to be a sharia supervisor at LAZ and also did not make Zakat fatwa issued by MUI as the primary reference by zakat officer. This information will be useful for stakeholders, including supervisory authorities and regulators.

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ISSUES AND CHALLENGES OF SHARIAH AUDITING IN ISLAMIC FINANCIAL INSTITUTION AND CORPORATE GOVERNANCE COMPLIANCE

Media Riset Akuntansi Auditing & Informasi ◽

10.25105/mraai.v18i2.3008 ◽

2018 ◽

Vol 18 (2) ◽

pp. 169 ◽

Cited By ~ 1

Author(s):

Agus Arwani

Keyword(s):

Corporate Governance ◽

Financial Institutions ◽

Financial Institution ◽

Practical Implication ◽

Supervisory Board ◽

Governance Structure ◽

Financial Statement ◽

External Auditors ◽

Islamic Financial Institutions

The study examines the perspective of practitioners who are involved directly and/or indirectly with the process of shariah compliance/auditing from Islamic financial institutions (IFIs) on the issues of standards for shariah auditing, auditors qualifications, and independence. Auditing Islamic financial institutions (IFIs) covers a wider scope than legal financial statement auditing. External auditors of IFIs not only conduct financial audits but also conduct tests on the shariah compliance of IFIs, according to fatawa (religious opinions) and guidelines set by the Shariah Supervisory Board (SSB). Shariah review is unique to IFIs, due to the requirement to ensure that all business activities and operations of IFIs adhere to shariah precepts. The scarce resourceful auditors with both shariah and accounting/auditing qualifications and the issue of self-review threat to independence may affect the reputable image of Islamic financial institutions. This article is literature method. The findings reinforce the importance of auditors' qualification and independence as currently there is no mandatory regulated professional shariah auditor code to be in tandem with the drastic growth of the IFIs. The paper offers practical implication to regulators in providing a direction to revise the existing standards for shariah auditing practices and to formulate a mandatory professional governance structure for shariah auditors.

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Contribution of Sharia Supervisory Board (SB) and Sharia Compliance Levels to Performance Indonesian Sharia Banking

Jurnal Manajemen ◽

10.32832/jm-uika.v11i1.3039 ◽

2020 ◽

Vol 11 (1) ◽

pp. 114

Author(s):

Prilla Kurnia Ningsih

Keyword(s):

Financial Institutions ◽

Supervisory Board ◽

Islamic Banks ◽

Efficiency Ratio ◽

Labour Costs ◽

Absolute Requirement ◽

Islamic Financial Institutions ◽

Effectiveness And Efficiency ◽

Branch Office ◽

Productive Assets

Sharia compliance is an absolute requirement that must be fulfilled by financial institutions that conduct business activities based on sharia principles as a manifestation of the characteristics of Islamic financial institutions. Supervisory Board (SB) contribution oversees and is responsible for ensuring all products and procedures of Islamic banks are by sharia principles. This study aims to measure the ratio of participation, effectiveness and efficiency of the sharia supervisory board to Islamic banking in Indonesia. This study used the AHP method with three indicators; the rate of contributions measured through sharia branch office in public Islamic bank and sharia business unit, to the effectiveness ratio measured by the total productive assets variable in public Islamic and sharia businesses unit, while the efficiency ratio is measured by aggregate variables of operating expenses and labour costs for Islamic public bank and sharia businesses unit. Based on this research, here are some critical result such as the ratio of the overall contribution is useful. The effectiveness ratio shows that the Supervisory Board (SB) is ineffective or not valuable for lending activities in Islamic banks based on Islamic public bank branch offices and sharia businesses unit. And the results for efficiency ratios indicate that overall Supervisory Board (SB) is less efficient for Islamic banks when issuing operational costs on Supervisory Board (SB) contributions.

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Etika Profesi Dewan Pengawas Syariah

MALIA: Journal of Islamic Banking and Finance ◽

10.21043/malia.v2i2.4946 ◽

2018 ◽

Vol 2 (2) ◽

pp. 238

Author(s):

Syai'in Syai'in

Keyword(s):

Organizational Structure ◽

Financial Institutions ◽

Supervisory Board ◽

Central Office ◽

Islamic Banking ◽

Religious Leader ◽

Competency Testing ◽

Bank Institution ◽

Islamic Financial Institutions

Among distinction between conventional banking and Islamic banking is the organizational structure. At Islamic banking and other islamic financial institutions should have a sharia supervisory board. The Shari'ah supervisory board is located in the central office and its function is to oversee the business activities of the bank in accordance with the principles of shari'ah. In carrying out its functions, the Shari'a supervisory board must follow the DSN fatwa. In the early days, members of the DPS banking were only proposed by the bank institution to DSN-MUI to obtain a decree as a ligality of their membership. Therefore at that time the syari'ah bank to propose candidates for the Shari'ah supervisory board simply chose someone who became a religious leader, cleric and ulama in the place of work of the bank.After issuing the DSN-MUI Decree No. 02 of 2000, DPS membership is made an extension of the DSN whose legality is improved in the membership mechanism through competency testing, which is in the DSN Language to attend "invitation to prospective DPS member friendship". Members of the Shari'ah Supervisory Board will get DSN certification if it has been considered to meet the standards set.

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Influence Cross Membership and Qualifications of The Shari’ah Supervisory Board’s Towards The Shari’ah Compliance related SSB Information

ADVANCES IN BUSINESS RESEARCH INTERNATIONAL JOURNAL ◽

10.24191/abrij.v6i1.9953 ◽

2020 ◽

Vol 6 (1) ◽

pp. 20

Author(s):

Iwan Fakhruddin ◽

Mohd. Abdullah Jusoh ◽

Norlia Mat Noerwani

Keyword(s):

Financial Institutions ◽

Firm Size ◽

Control Variable ◽

Supervisory Board ◽

Significant Positive Effect ◽

Coefficient Estimates ◽

Control Variables ◽

Compliance Level ◽

Islamic Financial Institutions ◽

Positive Effect

The purpose of this paper to analyze the influence of Shari’ah Supervisory Board Cross Memberships and Shari’ah Supervisory Board Qualification toward Shari’ah compliance related SSB information. In addition, this paper also explains the variable firm size as a control variable. The use of control variables so that the influence of SSB on compliance does not depend on other variables. This study reviews the Shari’ah compliance related SSB information as stated in the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standard, primarily compliance level with AAOIFI standards No 1 and No 5 related to Shari’ah Supervisory Board (SSB). This paper finds that’s the coefficient estimates variable of SSB Cross membership is positive significant at the 10% level. The coefficient estimates on SSB Qualification is negative significant at the 5% level. Furthermore, we also find that the bank size as a control variable has a significant positive effect at 1% level.

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The independence of the Shari’a supervisory board in the Islamic financial institutions of the GCC countries

Corporate Board role duties and composition ◽

10.22495/cbv6i2art2 ◽

2010 ◽

Vol 6 (2) ◽

pp. 20-34

Author(s):

Samy Nathan Garas ◽

Chris Pierce

Keyword(s):

Financial Institutions ◽

Boards Of Directors ◽

Code Of Conduct ◽

Supervisory Board ◽

Executive Management ◽

Gcc Countries ◽

The Board Of Directors ◽

Islamic Financial Institutions ◽

Supervisory Boards

Islamic Financial Institutions (IFIs) are governed by two boards: the Board of Directors (BoD) and the Shari’a Supervisory Board (SSB). The SSB is a panel of Shari’a scholars who act independently from other governance organs. This paper discriminates between dependent SSBs and independent SSBs by using twenty one variables, which are classified into three groups: the implementation of governance best practices, the recruitment of SSB members, and the relationship between the SSB members and other governance organs. This study is one of the first studies that provide empirical results about the SSB independence. Nevertheless, the research focuses exclusively on the Gulf Cooperation Council (GCC) countries and excludes the other countries where Shari’a supervision might have different forms. The study has developed a hypothesis, which was tested by a questionnaire. Data was collected from 76 Shari’a Supervisory Boards, 73 Boards of Directors, and 59 shareholders of IFIs in the GCC countries (Bahrain, Kuwait, Qatar, Saudi Arabia, and UAE) during 2009. The discriminant analysis has been used in identifying both dependent and independent SSBs. The paper finds five variables relevant in discriminating the two groups. These variables are the incentives provided to the SSB; the average remuneration to the SSB members; the existence of the policy of penalties for violating the code of conduct; the relation between the SSB members and the BoD; and the role of executive management in recruiting SSB members.

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ANALISIS RASIO PERMODALAN BMT AL IQ-TISHODY MATARAM

Jurnal Visionary : Penelitian dan Pengembangan dibidang Administrasi Pendidikan ◽

10.33394/vis.v5i1.3121 ◽

2020 ◽

Vol 5 (1) ◽

Author(s):

Menik Aryani

Keyword(s):

Small Business ◽

Financial Performance ◽

Financial Institutions ◽

Small And Medium Enterprises ◽

Supervisory Board ◽

Financial Statements ◽

Cooperative Management ◽

Islamic Financial Institutions ◽

Medium Enterprises ◽

Ministerial Decree

This study is entitled "Capital Analysis Ratio of BMT Al Iq-Tishody Mataram" The purpose of this study is to determine the level of sharia health and compliance in the AL-Iqtishody Mataram BMT 2019 on aspects of capital based on cooperative classification standards according to the cooperative ministerial decree and small business and intermediate number 07 / Per / Dep.6 / IV / 2016. Analyze cooperative financial statements based on the Decree of the Minister of Cooperatives and Small and Medium Enterprises Number 07 / Per / Dep.6 / IV / 2016, Evaluate the financial performance of cooperatives. This study uses 1 type of assessment of health aspects and components in the form of: Capital. The assessment will find out how healthy Al Iq-tishody BMT is in terms of finance, and how obedient in predetermined sharia principles. From these calculations the BMT Al Iq-tishody was classified as "Fairly Healthy" Cooperative. This is because it has an unfavorable value because BMT AL-Iqtishody does not yet have a sharia supervisory board, does not yet have equity participation and financing originating from Islamic financial institutions and also cooperative management does not yet have an educational certificate for management of Islamic financial institutions issued by competent parties. Keywords: Capital, Sharia Health and Sharia compliance

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Part I Introduction, 3 Islamic Financial Institutions

Islamic Finance ◽

10.1093/law/9780198725237.003.0003 ◽

2020 ◽

Author(s):

Henderson Andrew

Keyword(s):

Social Services ◽

Financial Institutions ◽

Asset Management ◽

Financial Services ◽

Supervisory Board ◽

Commercial Banking ◽

Time Value ◽

Islamic Financial Institutions ◽

Islamic Insurance ◽

Governing Law

This chapter discusses Islamic Finance Institutions (IFIs), which are established on the principle that there should be no separation between temporal and religious matters. Compliance with the Shari’a is in theory the governing law for all aspects of a practising Muslim's life, including financial and business transactions. Recognizing that, under the Shari’a, money does not have a time-value separate from the value of goods that are exchanged through the use of money, IFIs embrace the principle of sharing profit and loss and reject interest as a cost for accepting and lending money. Within these constraints, IFIs offer various services, including: (a) Islamic commercial banking; (b) Islamic wealth and asset management; (c) Islamic insurance; and (d) social services, where the IFI makes loans. In practice, a firm will offer Islamic financial services either as a full IFI, whereby its entire business is dedicated to offering Shari’a-compliant services and products, or through an ‘Islamic Window’, whereby a part of the firm's business is dedicated to offering Shari’a-compliant services and products. In either case, the firm will appoint a Shari’a Supervisory Board (SSB) entrusted with the duty of directing, reviewing, and supervising the firm's activities to ensure compliance with the Shari’a.

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Examining the legitimacy of Sukuk structure via Shariah pronouncements

Journal of Islamic Marketing ◽

10.1108/jima-03-2018-0050 ◽

2019 ◽

Vol 10 (4) ◽

pp. 1151-1166 ◽

Cited By ~ 1

Author(s):

Essia Ries Ahmed ◽

Aminul Islam ◽

Azlan Bin Amran

Keyword(s):

Financial Institutions ◽

Significant Contribution ◽

Public Awareness ◽

Supervisory Board ◽

Secondary Data ◽

Descriptive Statistics ◽

Content Type ◽

Regulatory Frameworks ◽

Islamic Financial Institutions

Purpose The purpose of this paper is to investigate and detect disclosure on the legitimacy identity of Sukuk structure in Shariah pronouncements. The study also examines the role of Shariah supervisory board on disclosure of legitimacy in Shariah pronouncements. Design/methodology/approach A total of 54 Islamic Sukuk in Malaysia representing the whole population were selected. Secondary data were used and sourced from Shariah pronouncements on Sukuk. Using descriptive statistics, the existence and the extent of existence of legitimacy disclosure on Sukuk in Islamic financial institutions in Malaysia were ascertained. Findings Using descriptive statistics, the existence and the extent of existence of legitimacy disclosure on Sukuk in Islamic financial institutions in Malaysia was ascertained. The research found that there is empirical evidence showing the effect of Shariah supervisory board on disclosure of legitimacy identity in Shariah pronouncements. Originality/value This study offers significant contribution to existing legitimacy of Sukuk structure literature. The study added a new discussion, i.e. legitimacy disclosure on the Sukuk. The study is intended to increase public awareness for legitimacy identity of Sukuk in the importance of Shariah compliancy not only in the form but also in substance. In addition, this study will give more benefits for Islamic financial institutions in the sense that they should amend some of their regulatory frameworks to push the Sukuk market investors to move toward asset-backed structure.

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Factors Influencing Internal Shariah Audit Effectiveness: Evidence From Bahrain

International Journal of Financial Research ◽

10.5430/ijfr.v10n6p196 ◽

2019 ◽

Vol 10 (6) ◽

pp. 196

Author(s):

Azam Abdelhakeem Khalid Ahmed ◽

Adel M. Sarea

Keyword(s):

Financial Institutions ◽

Structural Equation ◽

Supervisory Board ◽

Primary Source ◽

Internal Auditing ◽

Islamic Financial Institutions ◽

And Performance ◽

Questionnaire Method ◽

Audit Effectiveness ◽

Source Of Information

It is this research’s objective to analyze factors that cause an effective internal Shariah audit among the Islamic Financial Institutions (IFIs) in Bahrain. The questionnaire method has been employed to examine the said topic. The questionnaire’s primary source of information was the Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI) Governance Standards. Meanwhile, the respondents are consisted of 52 IFIs’ head of internal Shariah audit department. These IFIs are registered with the Central Bank of Bahrain. To analyze those relationships the structural equation method (SEM) via SmarPLS3.0 has been adopted. The study has found that the effective execution of internal Shariah audit is positively linked with the competency and performance of internal Shariah audit. Meanwhile, the other two variables, i.e. being independent and Shariah supervisory board have been discovered to be positively related with internal Shariah audit effectiveness. Nonetheless, there is no significant contribution. Overall, all the variables contribute 63.2% to IFIs’ internal Shariah audit effectiveness. The regulatory and professional bodies may benefit from this study in their assessment of factors that result in a successful and meaningful internal auditing of Shariah matters.

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