The control of the Shari'a Supervisory Board in the Islamic financial institutions
International Journal of Islamic and Middle Eastern Finance and Management
ISSN: 1753-8394
Article publication date: 30 March 2012
Abstract
Purpose
The Islamic financial institutions (IFIs) maintain better control over their transactions than conventional financial institutions (CFIs) through the existence of Shari'a Supervisory Board (SSB) and Shari'a Control Department (SCD). The purpose of this paper is to highlight the superiority of Shari'a supervision over external audit and Shari'a audit over internal audit. The study identifies five independent variables that affect the SSB control: ex‐ante Shari'a audit; ex‐post Shari'a audit; SCD reporting to the SSB; corrective actions of SSB towards the management violations; and the number of SSB members.
Design/methodology/approach
The variables are articulated in five hypotheses, which are tested by ordinary least square regression. The data are collected via a questionnaire which was sent to the SSB members of 219 IFIs in the Gulf Cooperation Council (GCC) countries.
Findings
The results indicate that ex‐ante Shari'a audit, ex‐post Shari'a audit, and reporting of SCD are significantly related to the SSB control, whereas corrective actions and the number of SSB members have insignificant relation.
Research limitations/implications
The research is focused on internal factors only, without considering other external factors such as stakeholders and regulators. Also, the research covered the GCC region alone.
Practical implications
The research recommends testing the hypotheses in other geographies to generalize the results, and including external factors as well as shareholders and board of directors.
Social implications
The research provides practical implications for the SCD role and calls for merging the SCD with the traditional internal audit department to reduce the excessive work of controlling.
Originality/value
The paper contributes to the literature gap about the SSB. It is believed to be one of few studies that provide empirical evidence about the SSB control in the IFIs of the GCC region.
Keywords
Citation
Nathan Garas, S. (2012), "The control of the Shari'a Supervisory Board in the Islamic financial institutions", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 5 No. 1, pp. 8-24. https://doi.org/10.1108/17538391211216794
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited