Abstract

The fast growth of Islamic Finance has simultaneously exposed the weaknesses in the system as being applied. The products have evolved as replication of the conventional products without any linkage with maqasid al-sharī‘ah. Conformation of many products to the tenets of the sharī‘ah is doubtful even in letter, of sure devoid of the spirit. There are concerns on sharī‘ah advisory, compliance and the regulatory systems as applied at national and the global levels. The countries like Malaysia and Pakistan and a few professionals from UK and UAE have lately taken some initiatives to introduce reforms in the related area, yet a lot more needs to be done to strengthen the underlying value system and the aspect of sharī‘ah compliance - the focal determinant for sustainable development of Islamic financial system. This paper suggests structural reforms for strengthening the value system at the sharī‘ah committees and regulatory levels to upkeep the integrity and credibility of the most respectful and crucial stakeholder of the Islamic finance – the sharī‘ah scholars and hence the system. Introducing a well-planned regulatory system and removing / managing the ‘conflict of interests’ in the structure of sharī‘ah supervision are the necessary steps to be taken with ultimate objective to achieve maqasid al-sharī‘ah. Establishment of Associations of sharī‘ah Advisors at national levels and a Global Commission on sharī‘ah Advisory at global level may help in resolving many related issues. The standards setting institutions, regulatory bodies and the sharī‘ah scholars have to make joint efforts in this regard.

Keywords

Sharī‘ah Governance; Sharī‘ah Advisors; Prudential Regulations; Fatwa Shopping; Conflict of Interest; Vanilla Products; AAOIFI Standards.