Shariah Supervisory Board (SSB) Islamic banking Bangladesh.

 

Shariah Supervisory Board (SSB)

A Shariah Supervisory Board (SSB) is an independent body of specialized jurists in fiqh al-Mudumalai (Islamic commercial jurisprudence) ... The Shariah Supervisory Board is entrusted with the duty of directing, reviewing and supervising the activities of the Islamic financial institution ... The fatwas (legal opinions) and ruling of the Board shall be binding

FORMATION OF THE SHARIAH SUPERVISORY COMMITTEE (SSC)

Article 104 of the Articles of Association of the Bank provides, on the licensing of the Social Islami Bank Limited, an Islamic Shari'ah Supervisory Committee shall be constituted with members from Fakihs/Islamic Scholars, Economists, bankers and Lawyers to advise the company on the operation of its business in order to ensure that they do not involve in any element which is not approved by Shari'ah. The Shari'ah Supervisory Committee consists of 07 (Seven) members nominated by the BOD of the Bank. Shariah Supervisory Committee of the Bank plays a vital role in framing and exerting policy for strict adherence of Shari'ah principles in all activities of the Bank since its very inception. The Shari'ah Supervisory Committee enjoys a high status in the structure of the Bank. Members of the Shariah Supervisory Committee meet frequently and deliberately on different issues confronting the Bank on Shariah matters. They give opinions and supervise to implement and comply with Shari'ah principles in all activities of the Bank.

The Shari'ah Supervisory Committee of the Bank plays a vital role in framing and exerting policy for strict adherence of Shari'ah principles in the Bank. As per Islamic Banking Guideline circulated by Bangladesh Bank, the Shari'ah Supervisory Committee is represented by 12 members consisting of prominent Ulama having adequate knowledge in Fiqhul Moamalat, renowned lawyers and eminent economists. The Shari'ah Supervisory Committee of IBBL gives opinions and guidelines to implement and comply of Shari'ah principles in all activities of the Bank, particularly in the modes of investment. The Committee is governed by a by-laws approved by the Board of Directors.

As part of the major responsibilities of the Committee, Shari'ah inspections is also conducted in all the branches under its direct supervision to ensure Shari`ah compliance in all activities of the Bank.

FUNCTIONS OF THE COMMITTEE

1.      The function of the Shari'ah Supervisory Committee is to offer views on matters related to the Bank from time to time. The Shari'ah Supervisory Committee may require any papers from the Bank and examine the same in order to ensure that all activities of the Bank are being carried out in accordance with Islamic principles.

2.      To devote time and effort to devise more Shariah-compliant transactional procedures, templates and banking products that enable the Bank to adapt to market trends while maintaining a highly competitive edge in deposit procedures, investments and banking services

3.      The SSC assists the BOD by way of giving advice on matters relating to Shari'ah. The BOD must respect their recommendations on Shari'ah principles as it is committed to run the Bank strictly in accordance with Shari'ah.

4.      Analysing contracts and agreements concerning the Bank's transactions, as submitted by the Chairman of the Board of Directors or any department/branch within the bank or requested by the Board itself so that Shariah compliance can be evaluated and maintained.

5.      Ensuring Shariah compliance in the implementation of all banking transactions and correcting any breaches.

6.      The SSC has a Secretariat with a Member-Secretary, who oversee whether the functions of the Bank are being carried out in accordance with the principles of Islamic Shari'ah. The Member-Secretary shall remain responsible to the Shari'ah Supervisory Committee.

7.      The status of the SSC shall be advisory to the BOD and Supervisory in respect of the operational activities of the Bank.

8.      The Committee submits a complete annual report for the Board of Directors, summarizing all the issues referred to the Board, as well as its opinion on the Bank's transactional procedures.

9.      The Shariah Supervisory Committee certifies the Annual report of the bank.

 

ACTIVITIES OF THE DEPARTMENT I.E. SHARIAH SUPERVISORY COMMITTEE SECRETARIAT

1.      The Secretariat consists of Muraquibs, who are entrusted with sufficient knowledge about all schools of Islamic thought. They supervise & monitor day to day operation of the banks as well as provide necessary guidelines in order to ensure full compliance of Shari'ah Principles.

2.      To conduct Shariah Audit and Inspection of all Branches of the Bank to ensure Compliance of the Shari'ah principles in each and every case of the Bank and will be responsible to the SSC.

3.      To motivate the executives and officers of the Bank to the Islamic Shariah principles, to make them practise Shariah rules, particularly in all types of Investments.

4.      The Secretariat also assists the Member-Secretary for conducting the Shariah Supervisory Committee meetings, co-operate to arrange client get together in the branches in presence of Shariah Supervisory Committee Members and convincing the people for Banking in accordance to Islamic Shariah.

Shariah Supervisory Board (SSB) is one of the main components of an Islamic bank. Shariah boards have fiduciary responsibilities towards the institution’s stakeholders.

In theory, the role of SSB involves six areas:

1.      Provide fatwas that certify permissible financial products;

2.      Undertake Shariah audit to ensure products comply with guidelines;

3.      Calculate zakat payments;

4.      Dispose of non-Shariah compliant income or earnings;

5.      Provide advice to the bank on the distribution of income to shareholders or depositors/investment account holders.

6.      Provide guidance to the bank on its wider social role

However, in practice, the role of Shariah boards varies significantly from one country to another. Further,

there are three types of Shariah boards:

1.      International Shariah Boards: For example, AAOIFI, and Islamic Development Bank (IDB). The main role of AAOIFI’s Shariah board is to publish Shariah standards in order to harmonize the industry’s practices. The IDB Shariah boards acts in an advisory capacity by providing Shariah opinions and working closely with other international agencies (such as: IFSB) in developing standards.

2.      National Shariah Boards: For example, Malaysia, Pakistan, Sudan, and Indonesia. In this case, the national Shariah board has the overall authority on the Shariah governance framework and policy.

3.      Institutional Shariah Boards: These are commonly referred to as Shariah Supervisory Boards (SSBs) and work on an institutional level.

Challenges Facing Shariah Supervisory Board

SSBs include some of the most prominent and respected scholars. Many of these scholars are highly regarded with their opinions having the potential to move markets. Nonetheless, concerns have been raised, that since Shariah scholars are generally employed directly by the financial institutions, their independence can be compromised, since bank managers use their influence to gain more acceptable opinions. This has been commonly referred to as “Fatwa shopping” or “Shariah advisory à la carte”.

Moreover, a decentralized approach to Shariah governance has led to further fragmentation in the industry, increasing transaction costs and overall efficiency of Islamic banks, compared to conventional banks. This has led to calls for a nationalized approach to Shariah governance. (One of the main arguments in favor of the Shariah board for each individual institution is that it encourages product development and innovation in the fast-growing industry).