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The study explores how financial institutes in Saudi Arabia report compliance with shari'ah teachings in terms of improving its legitimacy. The study covers all banks and insurance companies listed in Saudi stock market from 2012 to 2015. Around 181 annual reports were investigated by employing content analysis approach. The results show some trends toward more compliance with shariah teachings. Nevertheless, this is still below, especially for insurance companies. Analysis of variance suggests that banks are more likely to report about their compliance with shariah teachings than insurance companies. The conclusions that can be drafted about these results are that the nature of products and social attributes might influence the attitude of financial institutes to show their compliance with shari'ah teachings, reflecting the aim of the company to present its legitimacy.

To meet the philosophical underpinnings of Islamic financial institutions (IFIs), a sound shari'ah governance framework (SGF) for each and every IFI is vital. Establishment of a proper SGF is central for smooth and effective functioning of an IFI. In the periphery of shari'ah governance (SG), the role of Shari'ah Supervisory Boards (SSB) is considerably crucial. SSB constitutes one of the most important SG elements in a given IFI. One of the central objectives of SGF is to protect and boost the authenticity of IFIs among its stakeholders, which is instrumental for the resilience and growth of the industry. To achieve this, it is required that an end-to-end shari'ah assurance process is functionalised at IFIs. To this end, external shari'ah audit, which is a process of objectively evaluating the entire operations of an IFI from shari'ah perspective and ascertaining that all events are based on shari'ah principles, is of paramount significance.

A decade after 2008 crisis, scholars in mainstream field of finance are yet to proffer lasting solutions to the menace that target the root cause of the crisis. Islamic finance offers a simple message for the whole episode and others similar to it: introduction of God consciousness, removal of interest from the system, and its replacement with profit and loss sharing together with establishment of an ethic base corporate governance structure. Absence of ethical considerations is the main factor for financial crisis in the past hundred years. Models utilized by Islamic finance industry for financing and sharing of risk are musharakah and mudarabah. This chapter provides an overview of risk management and governance in both Islamic and conventional finance in the process outlining similarities and differences between the systems. It dissected through developments in the two fields and highlighted recent controversial topics affecting the field of finance in the modern world.

Shari'ah governance is a vital aspect that ensures internal shari'ah compliance function in Islamic financial industry, including the takaful industry. Shari'ah audit is a component of shari'ah governance in any Islamic institution as it independently attests the state of shari'ah compliance. Besides, it contributes towards shari'ah non-compliance risk management and enhances the quality of internal shari'ah audit function. The main aim for this chapter is to discuss the scopes and processes of shari'ah audit function in takaful operation. In addition, a discussion on applicable key controls in takaful operation is also provided. This chapter provides an insight into shari'ah audit implementation in a takaful operator, based on the information solicited from an interview session with its shari'ah auditor. This chapter provides fundamental aspects of shari'ah audit exercise in takaful operation and raises takaful operator's views on the challenges and adequacy of guidelines on shari'ah audit for its effective implementation.

This chapter explores the historical development of shari’ah governance infrastructures in the Malaysian landscape, pre- and post-Islamic Financial Services Act 2013 (IFSA) and its implications on the industry. This chapter analyzed two approaches developed in the shari’ah governance, namely, the inclusivity and uniformity approach. Inclusivity approach showed that the shari’ah compliance responsibility is shared inclusively by the shari’ah committee together with the institution’s top management. While the uniformity approach showed that the end-to-end shari’ah compliance is achieved through issuance of shari’ah standards that can be easily related by the practitioners into their banking operations and business. The coherence implementation of these approaches has enabled another important stakeholder, the judiciary to have more clarity and certainty in dealing with matters pertaining to Islamic banking and finance. Consumers’ trust and confidence in the financial sector is thereby secured and sustained, hence providing financial stability within the industry, which meets with the expectation and mandate given to IFSA.

Muslim investors must comply with the ethical injunctions prescribed for them while making financial investments. As per Islamic principles, the use of Riba (interest), Maysir (gambling) and Gharar (uncertain or contingent payoff contracts) is prohibited. This chapter provides some recent post great financial crisis evidence on the comparative performance of Islamic and conventional market indices. Islamic indices outperformed conventional market indices in terms of annualized returns except for emerging markets. In the overall period of 2007-16, it is found that Islamic indices have a lower coefficient of variation and hence higher reward to variability ratio. This suggests that Islamic indices are superior to conventional market indices adjusting for variability in returns. In most comparable Islamic and conventional indices, a strong co-movement and long-term co-integrating relationship is found. The results also highlighted causality running from conventional indices to the Islamic indices in most of the market groups, except for the S&P Global.

Cooperatives are formed with the idea of cooperation. Due to their features, cooperatives have the potential to address the issue of poverty alleviation and improvement in income distribution, which currently is the central focus of governments' economic policy making. Currently, Islamic cooperatives or shari'ah-based cooperatives have also been developing well. Shari'ah-based cooperative is essentially the transformation of conventional cooperative through an approach in line with the Shari'ah principles. It could be one of the best solutions in supporting Islamic banking and finance for unbankable customers. This chapter describes the development of cooperatives in Malaysia and Indonesia. The chapter also discusses the need for cooperative governance and highlights the features of cooperatives that results to their governance is more complex that the governance of business organisations. This chapter also highlights laws, regulation and shari'ah governance measures taken by both jurisdictions to promote growth of shari'ah-based cooperatives.

The aim of this chapter is to investigate factors affecting four of the gaps encompassed in the GAP model, which then results in Gap 5, the so-called customer gap, related to the variance between customer expectations and the perception of service quality (SQ). Four predictors were selected based on the literature review – marketing research orientation (MRO), service specification design (SSD), integrated technology (ITC) and integrated communication (ICO) – to examine their relationship with the customer gap. A valid and reliable questionnaire, developed for the purpose of the study, was used to collect data from a sample consisting of 600 employees from six hotels located in Amman, Jordan. The findings show that MRO, SSD, ITC and ICO significantly predict the four gaps in SQ on the provider side, which in turn significantly predict the customer gap. For companies, more attention should be paid to the four gaps that induce the customer gap.