University of Chittagong


Dept. of Finance

Course Code: FIN-507

Course Title : Islamic Finance

Dr. Begum Ismat Ara Huq

Professor, Finance, Faculty of Business
Administration, University of Chittagong
Contact : Mobile: 01716 469874
E-mail : ismathuq@[Link]
1
Chapter 2: Legal systems
and Shari'ah law
 Issues to be discussed

• Understanding Shari’ah Law;

• Laws that convert entire Financial System to being Shari’ah Compliant;
• Distinct Liability and Asset Structure of Islamic Banks;
• Liquidity Management Issues;
• Regulation of dedicated Islamic Banks and Windows;
• Sources of Shari’ah: the Quran, Sunnah and Fiqh Muamalat; and
• Composition and responsibilities of Shari’ah Board.
2.1 Understanding Shari’ah Law
Shari'ah law is a comprehensive Islamic ethical and legal
framework derived from the Quran and Sunnah, focusing on
justice, fairness, and social welfare. Islamic economics operates
within this framework, promoting halal (permitted) trade while
prohibiting riba (interest/usury), gharar (excessive uncertainty),
and maysir (gambling), emphasizing risk-sharing and ethical, real-
asset-backed transactions.
Core Principles of Shari’ah in Economics

• Prohibition of Riba (Interest): Money is not a commodity to be

sold for profit, but a medium of exchange. Gain must be generated
through legitimate trade or investment.
• Risk Sharing (Gharar & Maysir): Transactions with excessive
uncertainty, speculation, or gambling-like characteristics are
invalid. Profit is earned through labor, effort, and bearing risk.
• Halal Activities: Businesses must avoid forbidden (haram)
industries, such as alcohol, gambling, pork, and unethical
exploitation.
• Ethical Conduct: Islamic economics emphasizes honesty,
transparency, and social responsibility, prohibiting hoarding,
profiteering, and fraud.
 Principal sources of Islamic Economics
• The principles and fundamentals of Islamic Economics are
derived from two primary sources, i.e., the Quran and the
Sunnah.
Quran
The first of two sources is the Quran. Literally, the word Quran
means ‘the recital’. So clearly, one of the essential implications
of this designation of the Quran is that it is a recital. Therefore,
the Quran is a book meant to be recited. The purpose is not
just limited to recitation, but to understand and implement. It is
a divine book and the word of Allah, revealed as the final
revelation and guidance. It was revealed to Prophet
Muhammad (Peace be upon Him), Allah’s final prophet and
messenger.
• SUNNAH
The term Sunnah refers to the traditions of the Prophet
Muhammad (Peace be upon Him) that include his
sayings, actions and tacit approvals. Prophet
Muhammad (Peace be upon Him) is the last messenger
and the last law bearer in the series of prophets.
The tradition attributed to the Prophet Muhammad
(Peace be upon Him) is also known as Hadith. Using the
method of biographical analysis, those hadith were
collected and compiled by different scholars, among
others, a body of six most authentic books known as
Saha-e-Sittah.


SHARIAH

Shariah refers to the commands, prohibitions, guidance and
principles derived from the primary sources of Islam, the
Quran and Sunnah. Shariah can be broadly divided into five
main branches:
1. Rituals and worship that are referred in Arabic as Ibadah
2. Transactions and contracts that are referred in Arabic as
Muamalaat
3. Morals and manners that are referred in Arabic as Aadaab
4. Beliefs that are referred in Arabic as Itiqadaat
5. Punishments that are referred in Arabic as Uqubaat


FIQH

Islamic jurisprudence or Fiqh is an expansion of

the Shariah or code of conduct which is basically
derived from the Quran and the Sunnah. It can be
said that Fiqh is the product of Muslim jurist’s
understanding and interpretation of Shariah.
 SOURCES OF LAW AND ISLAMIC COMMERCIAL
LAW
• Unlike conventional finance which is regulated under
conventional commercial law, Islamic finance is
regulated under Islamic commercial law, which is
derived from two sources – primary and secondary.
• PRIMARY SOURCES
• The primary sources are based on revelation. As
mentioned earlier, they are the Quran and Sunnah.
These sources are not subjected to any change or
alteration.
• SECONDARY SOURCES
• The secondary sources are based on human
interpretation and reasoning, which, in practice, is or
should be traced back to primary sources. When a
specific decision or authority related to a particular
case is not found in the Quran or the traditions of the
Prophet Muhammad (Peace be upon Him), then the
accepted methodology is to undertake legal reasoning
and interpretation to find out the answer. This
methodology of law-making, in the light of the Quran
and Sunnah is known as legal reasoning or Ijtihad,
which forms the secondary source for Islamic law.
• The subsidiary sources for Ijtihad are:
a) Ijma (consensus of Muslim jurists): This refers to the
consensus of Muslim jurists on a particular legal issue at a
particular point of time after the demise of the Prophet
Muhammad (Peace be upon Him).
b) Qiyas (analogical reasoning): Qiyas is an extension of a
Shariah value from an original case (asl) to a new case,
because the latter has the same effective cause (illah) as the
former. The original case is ruled by the Quran or Sunnah and
Qiyas aims to extend the same ruling to the new case based on
the same illah. For example, prohibition of wine drinking is
extended to the consumption of drugs at the present time.
• MADHAHIB - SCHOOLS OF ISLAMIC LEGAL THOUGHT
• The different schools of Islamic legal thought
emerged due to the independent interpretations
of general principles of the Quran and Sunnah in
relation to specific cases by various prominent
Shariah scholars over the centuries. Each school
is designated the names of its founding scholars.
• Among those Islamic schools of law, the most
prominent were: The Hanafi School of Law, The
Maliki School of Law, The Shafi’i School of Law
and The Hanbali School of Law,
THE HANAFI SCHOOL OF LAW
The oldest and largest among the four Sunni schools of Islamic legal
thought is the Hanafi School of Law. It is named after its founder Abu
Hanifa an-Numan (May Allah’s mercy be upon him)-(699 A.D - 767A.D.).
This school of law follows the Iraqi tradition and is known for placing extra
emphasis on the role of reasoning and logic in the understanding and
practice of the Islamic rulings. This school has been the most flexible and
workable in the area of commercial transactions.

THE MALIKI SCHOOL OF LAW

The second of the four Islamic schools is the Maliki School of Law. It is
named after its founder Malik bin Anas (May Allah’s mercy be upon him)-
(711 A.D. - 795 A.D.). It was founded in Medina where Malik relied heavily
upon the well established practices of the early companions of the
Prophet Muhammad (Peace be upon Him) living in Madina, for his legal
formulations.
THE SHAFI’I SCHOOL OF LAW
The third of the four Islamic schools is the Shafi’i School of Law. It is
named after its founder Muhammad bin Idris al Shafi’i (May Allah’s
mercy be upon him) - (767 A.D. - 820 A.D.). He was thoroughly
familiar with and well-versed in the doctrines of both the Hanafi and
Maliki schools. The Shafi’i school of law is derived primarily from
Shafi’i’s works arRisala fi Usul-al Fiqh and Kitab al Umm.

THE HANBALI SCHOOL OF LAW

The fourth Islamic school is the Hanbali School of Law. It is named
after its founder Ahmad bin Hanbal (May Allah’s mercy be upon him)
-(780 A.D. - 855 A.D.). This school is more of an exercise on the
traditions than on the science of law and jurisprudence.
ISLAMIC CONTRACT
• Let us begin with the concept of Islamic Contract.
• In the Quran Allah says:
• “O you who believe! Fulfill (your) obligations” (Al Quran 05:01).
• This verse of the Quran forms the legal basis for a contract in
Islam.
• A contract is known as Aqd in Arabic which means ‘to tie’ or ‘to
knot’ or ‘to join’. Legally, a contract binds all the parties
involved in it. Due to the fact that a contract expresses the
intention of the parties and establishes their rights and
liabilities, it also clearly defines the nature, parties, processes,
means and duration of a transaction or business. Islamic
commercial law gives special importance to contracts. All
contracts in Islamic finance are structured in the light of
Shariah principles.
PREREQUISITES OF SHARIAH CONTRACTS
• Statement of contract:
Muslim jurists give remarkable importance to the
statement of the contract. Few of them opine that it is the
only pillar of contract, as all other aspects will
automatically follow the statement.
A statement of contract constitutes the offer and the
acceptance. An ‘offer’ is a statement of intention
expressed by one of the parties inviting the other party to
accept a proposal, whereas the ‘acceptance’ is an
expression of approving a proposal by the offeror with
regard to the same details as expressed in the offer.
• Contracting Parties:
There are at least two parties in a contract. These are the offeror and the
offeree. The offeror is the one who makes an offer and the offeree is the
one to whom the offer is made. These two parties should have legal
capacity to enter into a contract.
• Subject matter of contract:
The subject matter of a contract can either be a tangible thing, or work. It
should be in compliance with Shariah. Commodities or goods that are
prohibited in Shariah cannot be the subject matter of an Islamic contract.
It should also be in the ownership of the seller. If the subject matter is not
owned by any of the parties, then it cannot be a subject matter. It should
be known to both the parties. The subject matter can be identified
through physical viewing or viewing a similar object.
• Besides the islamic countries, a handsome number of Non-Islamic
countries throughout the world use islamic f inance wheree Islamic
shari’ah (Islamic law) acts as the pivotal guiding element.
• However, there is evidence showing the breach of Shari’ah compliance
due to lack of knowledge and awareness among employees, absence
of interest-free economy, government’s inability to provide supportive
rules and regulations, and adequate infrastructures for further
development (Ullah, 2014).
• Corresponding to the increasing demand for islamic f inance products
and the rapid growth of islamic banks and other f inancial institutions
worldwide, Shari’ah compliance has received signif ic ant attention
during the last few decades.
• Shari’ah compliance mechanism checks Whether Shari’ah governs the
process of origation of products and services, the execution of operations
and the reporting of f in ancial and nonf in ancial activities to the
stakeholders of Islamic banks and financial institutions.
• But, Shari’ah compliance mechanism differ from country to country
based on the authority and deligation of responsibility of the central
shari’ah board.
• There are Two shari’ah compliance frameworks are available -
1. ‘Separated’ Model upon a very high degree of independence on the
shari’ah board, Which is applied in Gulf Cooperation Council (GCC)
countries including Kuwait, Saudi Arabia, Bahrain, Qatar, and the UAE
and in the some other countries including Jordan, Yemen and Gambia.
2. Integrated Model upon harmonizing with banking requlations, which is
applied in Malaysia, Sudan, Pakistan, and Indonesia.
• Some International Bodies working on Islamic Finance such as
 Accounting and Auditing Organization for Islamic Financial Institutions
(AAOIFI)
 Islamic Development Bank (IDB)
 International Islamic Rating Agency
 International Islamic centre for Reconciliation for Commercial
Arbitration for Islamic Finance
 Institute of Islamic Banking and Insurance (IIBI)
 International Institute of Islamic Finance (IIIF)
 Islamic Financial Services Board (IFSB)
Provide guidelines and benchmarks on Shari’ah compliance, which largly
influence shari’ah compliance mechanism.
• Malkawi (2013) categorizes various Shari’ah Compliance structure into
three:
i. Shari’ah Board: The shari’ah board of a particular Islamic bank or
financial institution
ii. External Shari’ah board: The external shari’ah board is further divided
into the national shari’ah board, international shariah board including
AAOIFI, and IDB, and consultant shari’ah board including IIBI and IIIF.
iii. Regulatory and Supervisory Agency: the IFSB is considered the
regulatory and supervisory agency with a predominant aim to support
the industry as a whole by promulgating adequate regulation and
guidelines and by undertaking proper training and research.
• Shari’ah compliance is a comprehensive issue which deals with a
number of instruments including Shari’ah Supervisory Board (SSB) and
Shari’ah governance framework. With the help of these instruments,
shari’ah implemented by Islamic Banks in designing their products and
services and in execute their operations.
• Shari’ah Supervisory Board (SSB) is an independent body consisting of
shari’ah scholars who are specialized in fiqh al-mu’amalat (Islamic
commercial law) and relevant proficiencies associated with the nucleus
of islamic finance mechanism.
• The members of the SSB possess the right to interpret, review and
approve whenever there is a gap of opinions concerning any issue of
shari’ah. The process of interpretation is done through ijthihad, which
refers to independent reasoning in finding a solution to a specific
problem. Thus SSB is responsible for reviewing, supervising and
directing the legal, contractual and operating activities of Islamic banks.
• SSB provides guarantee and assures credibility to stockholders,
stakeholders and other related authorities that all activities of Islamic
Banks are performed as per Shari’ah.
• SSB also plays a significant role in the process of constructing Shari’ah
compliant products besides pure Shari’ah -based products.
• The Shari’ah governance is an organizational arrangement conducted by
SSB for ensuring shari’ah compliance and for conducting the shari’ah
audit in islamic banks in order to identify any deviations of the shari’ah
rules.
• Shari’ah governance framework is a part of corporate governance of
islamic banks, which is rather a complex blending of how firms are to be
directed, governed and controlled.
• Two models, namely stockholders model and stakeholders model, are
used to define corporate governance structure in conventional finance.
• Stockholders model suggests that a firm has one core objective, which
is to maxmize shareholders’ wealth.
• The stakeholder model suggests maximizing both shareholers’ and
stakeholders’ wealth. So firms following stakeholder model tend to have
more responsibility in the society.
• As an analogy, We can see the types of shari’ah compliance structure;
the ‘separated’ framework and the ‘integrated’ framework in the light of
the degree of independence of Shari’ah board. The former puts the
highest priority to the issue of Shari’ah compliance, while the latter
intends to harmonize it with banking regulations at the centre.
• Under the ‘separated’ model, SSB of each of the Islami Banks has the
suprime power of authority. In this model, there is no powerful authority
at the national level to structure and monitor institutional SSB. That is,
SSBs in the institutional level are independent of the central bank and
decisions taken by them concerning Islamic Shari’ah are deemed to be
accepted without any external resistance in the case of the permissibility
of contracts, shari’ah-compliant financial products, and shari’ah practice.
The GCC countries, and Jordan, Yemen and Cambia are the followers of
the separated model as the shari’ah compliance framework.
• However, anamolies exist among these followers of the ‘separated’
model which are shown in Table 10.1.
• In contrast, the ‘integrated’ model assigns the essential authority to the
central banks to pattern, control, advice, and follow of the islamic banks on
the conformity of shari’ah in their products and services, procedure, and
activities through a central SSB. Malaysia, Pakistan, Sudan and Indonesia
adopt, as Hamza (2013) calls it, the centralized shari’ah compliance
framework (Hamza, 2013).
• In fact, under this model dual authority exists where central authority at the
national level guides, advices, resolves shari’ah issues related to Islamic
banking. Individual SSB of respective islamic banks are responsible for
ensuring the compliance of the issues fixed by the central SSB at the
institutional level.
• Thus, it is likely to observe a harmonized shari’ah compliance practice
under the integrated model, which is relatively free from inconsistencies
concerning fatwas at the institutional level. As a result, the ‘integrated’
model ensures consistency in fatwas and explanations within the islamic
banking sectors as a whole, through coordination among central bank SSB
and SSBs of Islamic banks.
• However, variations exist among countries practicing the integrated model, which are shown in Table
10.2.
• Overview of Islamic Banking sector of Bangladesh:
• The Islamic banking sector of Bangladesh consists of full-fledge Islamic
Banks, Islamic banking branches of conventional banks, Islamic banking
counters or windows of conventional banks.
• Full fledge Islamic banks refers to the institutions where all the products
and activities are offered in such a way that complies with Islamic
Shari’ah. When one or more branches of a conventional bank offer
islamic banking activities they are regarded as Islamic banking branches
of conventional banks, and when a conventional bank has an islamic
banking counter or window then it is called Islamic banking window of a
conventional bank.
• At the end of June 2021, Bangladesh’s 10 full-fledged Islamic banks
have been operating with 1569 branches out of total 10788 branches of
the whole banking sector.
• In addition, 39 Islamic banking branches of 8 conventional commercial
banks and 194 Islamic banking windows of 13 conventional commercial
banks are also providing Islamic financial services in Bangladesh.
• The share of total bank branches of Islamic banks among all scheduled
banks accounted for 16.70% at the end of the quarter under review.
• At the end of the June 2020, deposits and investment grew by 2.90% and
1.72% respectively, while excess liquidity increased by 19.59% and
remittance increased by 27.36% compared to that of the preceding
quarter.
• The market share of Islamic banks in the entire banking sector has stood
at 27.26 percent in terms of deposits and 27.55 percent in terms of
investments at the end of June, 2021. It may be mentioned here that
Mutual Trust Bank Limited has started offering Islamic financial services
since May 2021 through dedicated windows.
• Central Shariah Board for Islamic Banks of Bangladesh (CSBIB)
• Central Shariah Board for Islamic Banks of Bangladesh (CSBIB) is a
national non-profitable corporate body of Islamic banks and Islamic
banking branches/windows operating in Bangladesh. It is an
organization registered by the government of the People’s Republic of
Bangladesh (Govt. Reg. No. S-9922 of 2009).
• Main objective of the CSBIB is to provide all-out cooperation and
assistance to the government, central bank, regulatory authority and its
member banks for the tracking right path to Islamic banking industry in
the light of Islamic Shariah.
• Shariah-based and Interest-free banking operation was introduced in
Bangladesh since Islami Bank Bangladesh Limited was established in
1983. Being inspired by the success of this bank, some new Islamic
banks have been established here.
• Besides, some conventional banks of the country joined the
advancement of Islamic banking through opening some Islamic banking
branches and windows. With the increase of the number of the Islamic
banks, the range of Islamic banking also spread rapidly. As a result,
Bangladesh Bank, the central bank of Bangladesh, thought that a
combined body was necessary for coordination among respective
Shariah supervisory boards of the Islamic banks and Islamic banking
branches/windows and to carry out research works in the fields of
Islamic banking and finance. So, Bangladesh Bank circulated some
specific indications to the chief executives of the Islamic banks
operating in Bangladesh one of which was to form a common Shariah
board.
• Mission & Vision OF CSBIB
• Mission
1. To assist and advise the member Banks to apply the uniform and unanimous
operational procedures;
2. To procure, preserve, translate and publish books, periodicals, journals on
Islamic banking;
3. To conduct Shariah related training and research works with a view to
implementing Shariah principles in the operation of the member banks and so
on;
4. To play due role in view to increase eagerness and awareness of the people
regarding financial transaction according to the principles of Islamic Shariah.
• Vision
1. To enable Islamic banks operating in Bangladesh to carry out their whole
activities according to unified guidance and principles of Islamic Shariah and
laws.
2. Islamization of whole banking system of Bangladesh so that the country
marches towards comprehensive development in the light of welfare-oriented
Islamic economics.
3. To establish CSBIB as an institution as well as a Shariah-based reference
centre for Islamic banking and finance.
Development of Islamic Banking System in Bangladesh
• In August 1974, Bangladesh signed the Charter of Islamic development
Bank and committed itself to recognize its economic and financial
system as per Islamic Shariah.
• Bangladesh government subscribed recommendation of Islamic Foreign
Minister’s conference held in Senegal in 1978 regarding systematic
efforts to establish Islamic Banks in the members countries gradually.
• In January 1981, then the President of the People’s Republic of
Bangladesh while addressing the 3rd Islmic Summit conference held at
Makkah and Taif Suggested, The Islamic Countries should develop a
separate banking system of their own in order to facilitate their trade
and commerce.” Earlier in November 1980, Bangladesh Bank sent a
representative to study the working of several Islamic Banks of different
countries.
• In November 1982, a delegation of IDB visited Bangladesh and showed
interest to participate in establishing a joint venture Islamic Bank in the
private sector. They found a lot of work had already been done and
Islamic Banking was in a ready form immediate introduction.
• Two Professional bodies Islamic Economies Research Bureau (IERB)
established in 1976 and Bangladesh Islamic Bankers Association (BIBA)
established in1980 made significant contributions towards introduction
of Islamic banking to top bankers and economists to fill-up the vaccum
of leadership for the future Islamic in Bangladesh. They also held
seminars, symposia and on Islamic economies and banking throughout
the country to mobilize public opinion in favor of Islamic Banking.
• At last, the long drawn struggle to establish an Islamic Bank in
Bangladesh became a reality and Islami Bank Bangladesh Limited was
founded 30th March ,1983 in which 19 Bangladeshi national ,4
Bangladeshi institutions and 11 banks ,financial institutions and
government bodies of the middle east and Europe including IDB and two
eminent personalities of the Kingdom of Saudi Arabia joined hands to
make the dream a reality.
Law governing the Islamic bank in Bangladesh
• There is no complete Islamic banking act for controlling, guiding and
supervising the Islamic banks in Bangladesh, some Islamic banking
provisions have been incorporated in the amended Banking Companies
Act, 1991 (Act No. 14 of 1991).
• Bangladesh Bank has not yet set up any separate department at its head
office to control, guide and supervise the operation of the Islamic banks.
Inspection and supervision of the Islamic banking operations are
conducted by the Bangladesh Bank as per the general guidelines framed
for the conventional banks. The role of Bangladesh Bank in controlling,
guiding and supervising the Islamic Banks in Bangladesh in accordance
with Islamic Shariah is at a preparatory stage. In observing the Shariah
implementation status of the Islamic banks, Bangladesh Bank examines
only the report of the respective banks’ Shariah Councils.
• There is no specific law on Islamic banking. The country first included
provisions relating to Islamic banking in its Income Tax Ordinance 1984
to include profits paid on Mudaraba as expenditure .In the 1990’s
instead of enacting any specific law, the central bank of the country,
Bangladesh Bank, established research and Islamic Economic Division,
which usually handled different matters relating to Islamic banking in
the country.
• In 2004, the Bangladesh Bank issued first ever Shariah Complaint Bond
i.e. Government Islamic Investment Bond and in 2007, IBBL issued
Mudaraba Perpetual Bond (MPB).
• In July 2009, the Bangladesh Bank issued instructions for the
identification of risks relating to financing and investment contracts
made by Islamic Banks for capital adequacy purposes.
• Then in November 2009, Bangladesh Bank issued its “Guidelines for
Conducting Islamic Banking” which supplement the existing Bank Laws,
rules and regulations.
• Bangladesh Bank launched the “Islamic interbank Fund Market”
(IIFM) to enhance the liquidity management tools of Islamic Banks
(2011).
• The Government considered the issuance of Sukuk for
infrastructure financing (2013).
• The parliament debated an amendment to the Banking Companies
Act 1991 in order to terminate the provision of Islamic banking
service through conventional Banks (2013). This Amendment will
inhibit the misuse and misappropriation of funds, and ensure the
full Shariah compliance of the Islamic Banking sector, thus creating
a more secure banking environment.
• The Bangladesh Bank launched a refinancing fund for the small and
medium enterprises (SME) sector that provides funding for
business in the rural areas through the intermediation of Islamic
banks (October, 2013).
• Section 27(i) of the Banking Companies Ordinance, 1962 as
adapted in Bangladesh conferred powers to Bangladesh Bank by
dint of which it authorized the Islamic banks in Bangladesh to carry
on Islamic banking business.
• Although there is no dedicated Islamic banking act or legislation
to control, guide and supervise Islamic Banks in Bangladesh.
Some Islamic banking provisions have already been
incorporated in the amendment Banking Companies Act
1991(Act no.14 of 1991).Bangladesh bank inspects, and
supervises Islamic banks operations according to the
regulations set down for conventional banks. The Shariah
Councils of individual banks are responsible for ensuring
Shariah compliance within their own organizations; the central
bank examines only their reports.
 Shariah Council/ Shariah Supervisory
Committee
• Shariah Council is a statutory body constituted by a bank
or a banking system of a country to scrutinize whether its
operations adequately conform to the codes of conduct
of Islam.
• Islamic banks, in their day-to-day operation, face
numerous problems and come across doubtful matters
for which they require interpretation, clarification and
judgement from a competent authority.
• The Shariah Board is such a body that is empowered to
give judgement on any issue and is, thus, fully regarded
by the concerned authority by which it is formed.
Formation of the Shariah Supervisory
Committee (SSC) of SIBL
• 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, Banker and Lawyers to advise the
company on the operation of its business in order to ensure that they do
not involve 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, which enjoys a high status in the
structure of the Bank. Members of the Shariah Supervisory Committee
meet frequently and deliberate on different issues confronting the Bank
on Shariah matters. They give opinion and supervise to implement and
comply Shari'ah principles in all activities of the Bank.
 Functions of the Committee
• The function of the Shari'ah Supervisory Committee 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 the Islamic principles.
• To devote time and effort to developing more Shariah compliant
transactional procedures, templates and banking products that enable
the Bank to adapt to market trends while maintaining a high competitive
edge in deposit procedures, investments and banking services
• The SSC assist the BOD by way of 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.
• Analyzing 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.
• Ensuring Shariah compliance in the implementation of all banking
transactions and correcting any breaches.
• The SSC have a Secretariat with a Member-Secretary, who see 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.
• The status of the SSC shall be advisory to the BOD and Supervisory in
respect of operational activities of the Bank.
• The Committee submits a complete annual report for the Board of
Director, summarizing all the issues referred to the Board, as well as its
opinion on the Bank's transactional procedures.
• The Shariah Supervisory Committee certifies the Annual report of the
bank.
 Activities of Shariah Supervisory Committee
Secretariat
• The Secretariat are consist of Muraquibs, who are entrusted with
sufficient knowledge about all schools of Islamic thoughts. 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.
• 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.
• To motivate the executives and officers of the Bank to the Islamic
Shariah principles, to make them practicing Shariah rules particularly in
all types of Investments.
• The Secretariat also assist 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 to convince the people for Banking in
accordance to Islamic Shariah.
Thank you