Shariah governance system
The institutional arrangements through which an institution ensures independent oversight of its Shariah compliance.
A Shariah governance system is the set of institutional and organisational arrangements through which an institution offering Islamic financial services ensures effective independent oversight of Shariah compliance. IFSB-30 lists the structures and processes it covers: issuing Shariah pronouncements, disseminating them to operating staff, and internal Shariah compliance review or audit. Supervisors assess it under IFSB-31, and AAOIFI sets out a framework in its governance standards.
Sources
This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.
Related terms
Shariah supervisory boardAn independent panel of Shariah scholars that approves an institution's products and oversees its Shariah compliance.Shariah reviewA regular compliance function that assesses whether an institution's operations follow Shariah requirements.Shariah auditAn independent assessment of internal controls, risk management and overall Shariah compliance, usually by internal audit.Shariah compliance functionThe internal control function that checks, day to day, that operations follow Shariah board rulings.