According to the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Shariah Supervisory Board is an independent legal body of scholars who are specialised in Fiqh ul Muamalat, Islamic jurisprudence law and Shariah Supervisory Board shall consist of at least 3 members appointed by the shareholders in their General Annual Meeting upon recommendation by the Board of Directors. However, Shariah Supervisory Board may include a member rather than those specialised in Fiqh ul Muamalat, but who should be an expert in the field of Islamic financial institution.
The main objective of a Shariah Supervisory Board is to certify the Muslim customers and the Muslim consumers that the products and also services being rendered to them by Islamic financial institutions are in line with the Shariah principles and therefore is lawful for them.
Actually, the prime beneficiaries of Shariah Supervisory Board are Muslim consumers and investors who may not have necessary skills and knowledge to evaluate the Islamic banking products in the light of Shariah teachings.
(CUT 1:50 – 2:20) SSB actually function as an extra layer of due diligence and governance within Islamic financial institutions in order to bring the Islamic banking transactions in a strict conformity with the Shariah principles and also with the expectation of Muslim consumers and Muslim community.
Shariah supervisory board functions as an extra layer of governance and due diligence in order to bring the Islamic transactions in a strict conformity with the principles of Shariah and with the expectations of the Muslim community.
And also in addition to that, Shariah Supervisory Board supplies a form of guarantee and also advocacy that the money being used in Islamic Financial Institutions are duly used in compliance with the Shariah principles and haram elements eliminated.
The role of Shariah Supervisory Board is quite similar to the role of auditors in Islamic Financial Institutions. We can summarize the role of Shariah Supervisory Board in advisory services, in compliance services, in audit services.