Roles and Responsibilities of Shariah Advisors of Islamic Banking InstitutionsBy: Omar Mustafa Ansari
It needs to be clarified that AAOIFI’s governance and auditing standardshave no legal standing in Pakistan, although these can be applied asbenchmark for global best practices.In this regard, IFSB standards are comparatively liberal. They require thatthe IIFS shall have in place an appropriate mechanism for obtaining rulingsfrom Shariah scholars, applying Fatawa and monitoring Shariah compliance inall aspects of their products, operations and activities. However, they allowthat outside scholars may also provide these guidelines and rulings.
Core Responsibilities of SA as per SBP’s Instructions
SBP requires that SA should review operations of the IBIs on a periodicbasis for Shariah compliance to ensure that all the products and servicesoffered by the IBI conform to the injunctions of Shariah rules and principles.However, there is a point crucial for understanding, that the role of reviewencompasses “all the products and services.” There is a dire need for furtherclarification in this area, as there are many functions, which at present, areconsidered outside the ambit of SA e.g. Human Resource policies, Marketingpolicies, Public Relations and so on.SA is also required to vet all the related policies and agreementsregarding the products, and their respective manuals. Once again, there mightbe some operational areas, which remain outside the ambit of the functions of the SA. SA is, however, responsible for all locations of the IBI.SA shall on an ongoing basis ensure that all products, services, relatedpolicies, and agreements of IBIs comply with Shariah rules and principles.Particularly, before launching any new products and services, SA shall duly vetthe related policies and agreements.SA shall review operations of the IBI on periodic basis in coordinationwith officials responsible for Shariah compliance to ensure that all the productsand services offered by the IBI conform to the injunctions of Shariah.According to IFSB standards, the mechanism for obtaining rulings fromShariah scholars, applying Fatawa and monitoring Shariah compliance shallcover, both, ex ante and ex post aspects of all financial transactions carriedout by the IIFS. It means to ensure Shariah compliance of the contracts and,later, the performance of obligations under the contracts, as well as, theoperations of the IIFS, including aspects such as Shariah compliance review,investment policies, disposal of non-Shariah-compliant income, charitableactivities, etc.
SA’s Access to Records
SBP empowers SA to have access to all records, documents andinformation from all sources including professional advisors and IBI employeesin discharge of his duties. The management shall be responsible to provide himall information relating to the IBI’s compliance with Shariah.
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