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Islamic Banking and Financial CrisisReputation, Stability and Risks$
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Habib Ahmed, Mehmet Asutay, and Rodney Wilson

Print publication date: 2013

Print ISBN-13: 9780748647613

Published to Edinburgh Scholarship Online: May 2014

DOI: 10.3366/edinburgh/9780748647613.001.0001

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Sharīcah Report: a Potential Tool for Sharīcan Non-Compliant Risk Management

Sharīcah Report: a Potential Tool for Sharīcan Non-Compliant Risk Management

(p.170) 10 Sharīcah Report: a Potential Tool for Sharīcan Non-Compliant Risk Management
Islamic Banking and Financial Crisis

Abdou Karim Diaw

Irawan Febianto

Edinburgh University Press

This chapter examines the extent to which Sharī’ah reports can be used as an effective tool in risk management, with emphasis on non-compliance risks. Drawing on the experience of the ten leading Islamic banks, it considers how banks conform to the guidance issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) on Sharī’ah reporting. It shows that the banks differ in terms of conformity to the AAOIFI guidance, from 100 per cent for the Al Baraka Group of Bahrain to 18.2 per cent for the Kuwait Finance House parent company. The chapter argues that the Sharī’ah Supervisory Board, which is responsible for the governance structure of Islamic financial institutions, plays a key role in the management of Sharī’ah non-compliance risk.

Keywords:   risk management, non-compliance risk, Islamic banks, Sharī’ah, reporting, Sharī’ah Supervisory Board, Islamic financial institutions

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