Sharia compliance in financial products

Bazari Azhar Azizi
MSc candidate of Islamic finance at Durham University

PREMIUM

Durham / Thu, July 13, 2017 / 01:34 pm

Personal touch: A teller serves a customer at the sharia lender Bank Syariah Bukopin's head office in Central Jakarta on Feb. 7, 2017. (JP/Dera Menra Sijabat)

Islamic financial institutions (IFIs) differ from conventional financial institutions. The primary distinction of Islamic financial instructions is the application of Islamic or sharia principles in its business activities. Thus, the adherence toward the sharia principles is essential for the IFIs. The establishment of a body to ensure sharia-compliance implementation in the IFIs is crucial. Hence, from the late 1970s, the designation of a different board comprising sharia scholars has become standard in countries with the co-existence of Islamic and conventional banks, and other IFIs are following this trend. Some countries employ a central sharia board to ensure sharia compliance. Therefore, the discussion arises as to whether the assurance of the sharia-compliance should be conducted at the organizational or state level. The sharia board governs the IFIs by producing rules to...