Riyadh, Asharq Al-Awsat – An Islamic Bank’s commitment to the provision of Islamic Sharia law and the accuracy with which it implements these laws are considered critical factors when Islamic finance clients are choosing between one Islamic institution and another. Therefore we find that Islamic financial institutions try to exploit this factor and focus on this aspect of their operations and market themselves as an Islamic financial institution, utilizing a variety of methods such as the design of the institution’s logo in order to express its Islamic identity, as well as selecting language that evoke the institute’s Islamic identity and vision. Other measures that aim at instilling confidence in the client’s subconscious include appointing figures who are well known to the target audience to the Sharia group administration. These marketing methods may have been effective in the past however clients today are more conscious and aware of the criteria that a financial institution must fulfil before it can truly be considered an Islamic financial institution. An Islamic logo or the presence of well-known Islamic figures is no longer sufficient to grant the confidence of customers in the Islamic integrity of financial institutions. Perhaps the most important criteria that clients look at is the location of the Sharia group in the Islamic financial institution’s administrative structure, and whether this guarantees the Sharia group influence and independence with regards to decision making.

An Islamic financial institution is comprised of three departments; firstly there is the product development or research department that develops [financial] services and products that are compliant with the provisions of Islamic Sharia law in collaboration with the institution’s administration. The second department is the Sharia commission department, and this presents these products and services to the Sharia authority and coordinates between the Sharia authority and the Islamic financial institution. The third department is the Sharia oversight department, which oversees the institution’s financial activities and ensures that they fall within the provisions of Islamic Sharia law. Therefore it is not acceptable for the administration of the Sharia group to be affiliated to any department within the financial institution, but instead this should be directly tied to the Chief Executive of the institution and should also have direct representation on the Board of Directors review commission. Due to the sensitive and delicate tasks carried out by a Sharia group, the financial institution should be very careful in selecting staff-members, employing only those who possess knowledge of the Sharia, vocational competence, and administrative experience, because the Sharia group represents the financial institutions commitment to the provisions of Islamic Sharia law, and it is the gateway to competing in the Islamic financial market.

Observers today are surprised by some financial institution’s claims that they are Islamic financial institutions when in fact the institution has no Sharia group whatsoever, or at best its Sharia group is powerless. What is even more astonishing is that one might find an Islamic financial institution that enjoys a good reputation in terms of its commitment to Islamic Sharia law as a result of the efficiency and independence of its Sharia Group – as this Sharia Group need only compete against its counterparts – that voluntarily gives this up by weakening its Sharia group and eliminating its independence. The Quran says: “And be not like her who unravels her yarn, disintegrating it into pieces after she has spun it strongly.” [Surat al-Nahl; Verse 92].

Islamic financial institutions should be aware that clients today are inclined towards suspicion rather than trust and against giving institutes the benefit of the doubt as if they mean to say “if they do not have evidence to back up their claims then they are frauds.” This is as a result of the media attention on Islamic finance which has effectively put the spotlight on the judicial disputes surrounding a number of Islamic financial services, and the mistakes made in the application of these financial services. Therefore these institutions must provide evidence of the credibility of their claims. The strongest and most credible evidence that an Islamic financial institution can provide is the existence of a strong, independent, and effective Sharia group, with a trusted and reliable staff. If they are unable to show this, these Islamic financial institutions will lose out.