Sharia Compliance Task and Islamic Banking: Legal and Judicial Insights
Dr. Ghalib Mohammad Al-Bulooshi
Assistant Professor of Commercial Law – College of Law – University of Bahrain
Abstract:
Unlike conventional-financing, Islamic-financing, should adhere to values and principles of Islamic-Sharia. The Muslims and non-Muslims investors alike believe that the Islamic financial and banking operations are distinct and therefore remote from instability and immoral concerns attached to the conventional operations.
With the increase in number of Muslims and non-Muslims investors, Islamic finance and banking could have a significant role in the economic growth. However, its development is largely dependent on the recognition of its true potentials, which is reliant on the fact that it is Sharia-Compliant.
While, it is necessary to establish that the innovated instruments used in Islamic financial and banking operations are lawful an inconsistence with Sharia principles, the current modes of finance and banking are not free from doubt and in fact subject to Sharia non-compliance risk.
In this context, the paper addresses the diverse opinions of Sharia-Scholars in regard of Islamic financial operations to establish the undoubted need for the so-called Sharia-Compliance task. It notes that the current Islamic financial and banking practices are not free from serious legal and judicial challenges. Referring to case-rulings, it is strongly suggested that the mere approval of financial products or transactions by Individual Sharia-Scholars or Institutional Sharia-Boards is not enough to build the level of trust and confidence needed for the evolvement of Islamic finance as an alternative financial industry.
In order to enhance the task of Sharia-Compliance, the paper points to the newly emerged trend of having a so-called Higher or Central Sharia Authority. Nonetheless, it notes that the aim behind the existence of such bodies in main could be to help in the harmonization of the Islamic financial and banking practices at the national level. To overcome the legal and judicial concerns related to the Sharia-Compliance task, the need is there for legislative and judicial changes, which should provide theses bodies with real powers to closely supervise the Sharia-Compliance task and assign special courts to oversee this difficult task more efficiently.