Riyadh, Asharq Al-Awsat – The Sharia body is an important part of the Islamic financial institution as well as of any conventional institution that offers Islamic financial services and products. It is what gives the financial institution the right to market itself or its products as Sharia compliant. The reason for this is that the Islamic financial services are derived from Islamic Sharia law, and those who can derive Sharia law from it and can apply it to reality in the correct manner need to be highly qualified. Such a qualification can only be found in scholars of Sharia law and jurists. In reference to these people, the Quran says: ‘When there comes to them some matter touching (public) safety or fear, they divulge it. If they had only referred it to the Messenger, or to those charged with authority among them, the proper investigators would have tested it from them (direct). Were it not for the Grace and Mercy of Allah unto you, all but a few of you would have fallen into the clutches of Satan,’ (Surat An-Nisa; Verse 83). According to the Hadith narrated by Imam Ahmed on the authority of Abu Darda, may God be pleased with him, ““Scholars are the inheritors of the prophets, and the Prophets do leave behind neither Dinar nor Dirham but rather they leave behind knowledge. So whoever takes it has acquired an abundant portion.”
In the Islamic world, scholars are of significant status so they alone can pass a judgment according to their opinions. For this reason, the Sharia body has a similar standing within the Islamic financial industry after it established itself as one of the key components of this industry. Even international financial corporations were keen to form Sharia bodies and hire scholars who are well known in the Islamic world to work for them and keen to show that these bodies are independent from these corporations. The target of all this is to convince clients to buy their products and to work with them. However, in view of the progress and the rapid growth taking place within this industry, and due to the ability of those renowned scholars to meet market requirements, and also due to the administrative advancement achieved in the world as a result of globalization that has affected all walks of life in the Islamic world, especially in the financial industry, and due to the advancement of the financial criteria governing the financial industry, the Islamic financial industry must be able to cope with such progress by organizing and providing a framework to Sharia bodies.
Part of the development that has taken place within Sharia bodies was the decision made by the Accounting and Auditing Organization for Islamic Financial Institutions with regards to appointing a Sharia observation committee. Moreover, the Islamic Financial Services Board has set out guidelines governing the performance of Sharia bodies called ‘Guiding Principles on Sharia Governance Systems for Institutions Offering Financial Services.’ Nevertheless, Sharia bodies are still working without a legal framework that governs their work and clarifies its responsibility towards institutions that work with it such as the legal responsibility towards the decisions they make. This is necessary in case their decisions are proven to be incorrect, for example if a decision is vetoed by the judicial authorities in the country in which they operate.
Systemizing or providing a framework to Sharia bodies is also required in case these bodies are negligent in their research that is necessary for reaching a correct Sharia decision, or in case these bodies retracted their decision as a result of a change of viewpoint regarding a particular issue. It is also necessary in order to govern the Sharia body’s liability towards the clients and beneficiaries of the institution’s financial services in all the aforementioned cases, and this framework is essential to rectify the situation in case the Sharia body failed to perform its supervisory duties correctly or applied the rules incorrectly, causing harm to clients as a result.
Such legal framework, and the subsequent liability of Sharia bodies for their decisions and opinions, does not exist within the laws of Islamic banks and financial institutions issued by the countries that enacted these laws, and this should not be overlooked. The work of Sharia bodies is of equal importance to that of an auditor or an expert so Sharia bodies, external Sharia supervisory bodies and Sharia consultancy offices should be treated, financially, as an external expert or auditor with regards to holding them liable for their work, which, up to now, they have been trying to avoid. However, in the interest of Islamic finance, we must call for this principle to be enforced so that the performance of Sharia bodies and Sharia supervisory and consultancy institutions becomes disciplined.
When this principle is enacted, no decisions will be made unless they are carefully studied, and no report will be issued unless it is scrutinized and examined in line with professional criteria. Therefore, several negative phenomena that Islamic finance is suffering from, such as baffling fatwas, could be eliminated, and of course every one remembers the Sukuk issue. Furthermore, in this way, the excuses of misapplication that Sharia bodies give when questioned about controversial issues will decrease.