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Shari'a Governance

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Shari'a Governance

Shari’a governance is the most important feature of ahli Islamic, as it distinguishes us from the conventional counterpart.  Shari’a governance is defined as a system whereby the bank adheres and abides by the Shari’a principles in all its activities.  The main objective of the Shari’a governance framework is to ensure Shari’a compliance is achieved at all times and at all levels, which enables the Bank to be acknowledged as being fully Shari’a compliant in all aspects.

The key elements of Shari’a governance framework of the Bank are as follows:

  • Shari’a Supervisory Board (SSB)
  • Head Shari’a Audit and Compliance/Internal Shari’a Reviewer
  • Shari’a Audit Unit
  • Shari’a Compliance Unit

Besides the above specific functions, the following are also considered as part of for Shari’a governance:

  • The Board of Directors (the ‘BOD’) and the Management of the bank have a very important role to play in achieving and maintaining Shari’a compliance. Without adequate support of the Board and the Management, it would be difficult for the Bank to achieve Shari’a compliance
  • The BOD of the Bank have the ultimate responsibility to create and maintain a robust Shari’a governance framework to ensure Shari’a compliance for ahli Islamic. The BOD approves all the procedures of the Bank related to Shari’a matters, in consultation with the SSB, and shall put in place mechanisms to ensure that such procedures are effectively implemented

Responsibility of Shari’a Supervisory Board (SSB)

The main responsibility of the SSB is to form and express an opinion on the extent of compliance of the bank with the Shari’a, based on a review of its activities. Briefly the duties of the SSB include:

  • Advising the BOD and management on Shari’a-related matters;
  • Advising relevant parties that serve the bank, such as its legal counsel, auditor or other consultants, upon request;
  • Endorsement and validation for all relevant product documentation, services, procedures and process flows, etc. The SSB reviews include the product concepts, descriptions, structures, advertisements, in addition to discussing these with the relevant staff, if required.  Changes made by the SSB are final and binding on the bank;
  • Endorsement and validation for all relevant contracts documentation, agreements and other legal documentation used for ahli Islamic transactions.
  • Review and approval of the yearly Shari’a audit plan;
  • Supervision of the Shari’a Audit and Compliance Department of the bank;
  • Overseeing the calculation and distribution of zakat (if applicable);
  • Excluding profits of Shari’a non-compliant transactions and overseeing their distribution for charitable purposes;
  • Review and approval of all business products and their parameters, including income calculations and profit distribution; and
  • Provision of selective Shari’a training sessions, relating to Islamic finance products and services, to employees.

The SSB is empowered, as and when necessary, to delegate some of its duties to Head Shari’a Audit and Compliance.

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