IslamicFinance.de

An independent legal entity should oversee the way in which Islamic financial institutions certify they are following sharia principles, Kuwait’s central bank governor Mohammad Al-Hashel said. Currently, boards of sharia scholars at financial institutions rule on whether activities and products follow religious principles. They are also involved in audits that determine whether the institutions are operating in a compliant manner. At the same time, the scholars are on the payroll of the Islamic banks which they vet, an arrangement contrary to good governance. The growing role of Islamic finance in some national economies is now prompting government watchdogs to pay more attention to the sector. The creation of an independent legal body could see scholars independently reviewing the work of their peers. Establishing the body would involve challenges but it could take its cues from the conventional financial auditing profession.