Shari’ah Supercision in Modern Islamic Finance Yusuf Talal DeLorenzo3
qualified to serve as Shari`ahsupervisors is limited.My own suggestion in regardto preparing scholars for afuture in Shari`ah supervision istwofold.
Firstly, Islamicfinancialoperations may appoint, inaddition to its full Shari`ahBoard members, junior memberswho will participate indiscussions,prepare memos andbriefs, take notes, and performresearch and other tasks for theShari`ah Board, but who willnot have full status as votingShari`ah Board members.Secondly, junior members may beappointed on a rotating basis,such that each will serve, muchlike a law clerk for a serving judge in the United States, for aperiod of one year. By means of this rotating arrangement, manyscholars will have an opportunityto learn first hand aboutthe workings of Shari`ahsupervision.Moreover, as juniormembers become increasinglymore familiar with modernbusiness norms and practices, itwill become easier for them toanalyze situations and think through options, with the resultthat their contributions to thework of the Shari`ah SupervisoryBoards will become increasinglyvaluable. Obviously, such junior members will becompensatedfor their efforts,though not at the same level asthe full board members.
Elements of Shari`ahSupervision: Independence
In order to be effective,Shari`ah supervision must beindependent. In addition, thedecisions of the supervisor/smust be binding on management.If these steps are nottaken, the credibility of thesupervision, and the company,will be in question. Therecommendationof AAOIFI is thatShari`ah supervision must serveat the pleasure of the company’sBoard of Directors, and not besubject to management. Undersuch an arrangement, the Boardwill be free to approve ordisapproveof what managementdoes, or proposes to do, solelyon the basis of Shari`ah/legalconsiderations. Of course, thisis not to say that a Shari`ahBoard will automaticallybecome a thorn in the side of management. On the contrary,most Shari`ah Boards operate inthe spirit of cooperation andaccommodation.
Elements of Shari`ahSupervision:Communication
An essential element in thesuccess of any undertaking iscommunication. This is equallytrue in regard to Shari`ahsupervision.To begin with, theremust be clearly delineated linesof communication betweenmanagement and Shari`ahsupervision. Oftentimes, anIslamic financial institution willappoint one of its executives,whether from businessoperations,finance, or legal, to act asliaison with the supervision.This person will be responsiblefor coordinating anddocumentingregular meetings, arrangingfor the requirements of Shari`ahsupervision, following up ondecisions and suggestions, andprocessing and channelingcommunications to and fromsupervision. When boardmemberslive on different continentsand work in different timezones, the work of such acoordinatorcan be challenging.
Elements of Shari`ahSupervision: Education
The correlate of consumeradvocacy is consumer education.In making this observationI mean to refer to the world of possibilities for enhancingMuslimconsumer awareness of, andappreciation for, Islamicfinancialservices and products. Forexample, the Dow Jones MarketIndexes developed andsupporteda course on the Principlesof Islamic Investing thatwas offered to students of theDow Jones University on theinternet. Unfortunately, thecourse is no longer available,though efforts are underway forits revival at another venue.Likewise, several Islamicfinancialinstitutions supported theeffort to produce the
Guide to Islamic Investing
in cooperationwith the Lightbulb Press; andothers are supporting the
Guideto Islamic Home Acquisition
. Inshort, every institution offeringIslamic financial services needsto concern itself, to one degreeor another, with issues of consumereducation. Obviously,the chief concern will be toprovide information about theirown products. But, generallyspeaking, Muslim consumersneed to know that Islamicfinancial alternatives exist. Theyneed to know that thesealternativesare viable, from both areligious viewpoint and apracticalone. And they need toknow that these are competitiveand worthy of their trust. Theseare the basics of such aneducation.Obviously, there is muchmore that can be done. In aservice-oriented market that isdriven by competition, thefirms with the better serviceswill have the most success.Shari`ah supervision thatengages in consumer educationenhances service, not to mentionconsumer confidence.
Shari`ah Supervision Then and Now
As the sector goes, so goes itsShari`ah supervision. Perhaps