6.1.1 Character, Professional Ethics, and Conduct

The origins of the word “character” date back to the Greek term charaktêr, which originally meant a mark imprinted on a coin. Over time, it became more common to use character to distinguish features of items or things from one another.⁴ Nowadays, the word is often used to distinguish qualities of people, such as strength and originality. In the field of philosophy, the term generally refers to the moral dimension of people; when speaking about character, Aristotle used the Greek term ēthē.⁵ In contemporary approaches to addressing moral character, on the one hand normative ethics sets the moral standards that deem conduct right or wrong, and on the other hand, applied ethics deals with specific controversial moral issues.⁶

Etymologically speaking, the word “ethics” comes from the Greek word “ethos,” which means habit or custom.⁷ In Arabic scholarship, the term ethics or morality is translated as khuluq. Khuluq is used in many places in the Qur’ān in the context of character, morality, and custom. For example, “And indeed, you are of a great moral character” (68:4) and “This is not but the custom of the former peoples” (26:137). Al Qurtubi (d. 1273 CE) reports several interpretations for the phrase khuluq al-awaliyyin used in the previous verse, including their ancient customs, religion, ideology, or doctrine (madhab).⁸ Ethics can thus be thought of as the moral principles that govern the behavior of an individual. Prophet Muhammad (pbuh) highlights their importance when he says: “I was sent to perfect honorable morals.”⁹

Beekun and Badawi identify three criteria of an Islamic ethical system, when examined from a stakeholder's perspective: equity or justice (‘adl), trust (amanah), and benevolence (ihsaan).¹⁰ ‘Adl necessitates that individuals be just in their dealings, amanah drives persons to use resources efficiently given that they are entrusted with them as vicegerents of God, and ihsan motivates individuals to perfect their tasks in order to please an ever-watchful God.¹¹ The Qur’ān and sunnah of prophet Muhammad (pbuh) are the two primary sources of normative Islamic ethics. Besides conveying the teachings of Islam theoretically, prophet Muhammad (pbuh) practiced what he preached. The Qur’ān says: “And you are certainly on the most exalted standard of moral excellence.”¹²

Good morals and character are at the core of sharī‘ah. This is particularly important for individuals in leadership positions who direct others, as members of the community observe them closely. Islamic jurists are one such category of leaders to whom this is applicable. They issue Islamic legal rulings to address varying issues that are presented before them, and this requires them to uphold great ethics and morals. This should, therefore, be reflected in their character, through their honesty, integrity, and trustworthiness. According to Imam Ahmad ibn Hanbal, one who dedicates himself to issuing sharī‘ah rulings must possess the following five characteristics:

• First, he needs to possess a sincere intention of issuing rulings for the sake of God, and not for power, fame, or material objectives.
• Second, he must be patient, dignified, and serene.
• Third, he must be knowledgeable and proficient in fulfilling his duty.
• Fourth, he should have sufficient resources to meet his needs and not have to depend on others.
• Fifth, he must cautiously interpret questions, and wittingly recognize various ways intended to lead him toward one ruling or another.¹³

The IFSB advises members of the Board of Directors (BOD) to consider the competence, character, diligence, soundness of judgment, and capability of prospective SSB members and members of the internal sharī‘ah audit function when assessing their suitability to serve the Islamic financial institution (IFI). It recommends a transparent process that should consider the following:

1. whether the person has been convicted of a criminal offence, particularly an offence relating to dishonesty, fraud or financial crime;
2. whether the person has been the subject of any adverse findings or any settlement in civil proceedings, particularly in connection with banking or other financial business, misconduct or fraud;
3. whether the person, or any business in which the person is a controlling shareholder or has a controlling interest or exercises significant influence, has been investigated and disciplined or suspended by a regulatory or professional body, a court or tribunal, whether publicly or privately;
4. whether the person has been the owner, manager or director of a company, partnership or other organisation that has been refused registration, authorisation, membership or a licence to conduct trade, business or profession, or has had that registration, authorisation, membership or licence revoked, withdrawn or terminated, resulting in the person being refused the right to carry on a trade, business or profession requiring such a licence, registration or other authorisation;
5. whether the person has been a director, partner or otherwise involved in the management of a business that has gone into receivership, insolvency or compulsory liquidation while the person was connected with that organisation or within a reasonably short period (e.g. one year) after the person’s departure from the institution;
6. whether the person has been dismissed, asked to resign, or resigned from employment or from a position of trust, fiduciary appointment or similar position because of questions about honesty and integrity;
7. whether the person has ever been disqualified from acting as a director or serving in a managerial capacity because of wrongdoing;
8. whether the person has not been fair, truthful and forthcoming in dealings with customers, superiors, auditors and regulatory authorities in the past and has been the subject of any justified complaint relating to regulated activities; and
9. whether the person demonstrates a readiness and willingness to comply with the requirements and standards of the regulatory system and other legal, regulatory, or professional requirements and standards.¹⁴

When addressing the conditions of a fatwa issuer, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards direct attention to the moral dimension: “He should also be known for his discernment, cautiousness and knowledge about the circumstances and traditions of people, and should always remain alert against the different means of human misbehavior.”¹⁵ This is important, as SSBs are guided by their moral beliefs and sense of obligation to the community, as well as their peers.¹⁶ In general, SSB members must maintain integrity in all actions. IBs and regulatory guidance issued by authorities consider poor morals a valid reason for the disqualification of an SSB member. For example, Bank Negara Malaysia (BNM) disqualifies an SSB member if the individual commited any of the following breaches:

1. acted in manner which may cast doubt on his fitness to hold the position of Shariah Committee member;
2. failed to attend 75 per cent of meetings scheduled for the Shariah Committee in a year without reasonable excuse;
3. declared a bankrupt, or a petition under bankruptcy laws has been filed against him;
4. found guilty for any serious criminal offence, or any other offence punishable with imprisonment of one (1) year or more; or
5. subject to any order of detention, supervision, restricted residence or banishment.¹⁷

The regulatory guidelines issued by the State Bank of Pakistan (SBP) present another example of directives that consider the moral grounds of SSB members a key requirement for their appointment. SBP lists the following requirements among other “fit and proper” criteria for SSB members:

Solvency & Financial Integrity

1. Has not been associated with any illegal activity especially relating to banking business.
2. Has not been in default of payment of dues owed to any financial institution and/or default in payment of any taxes individual capacity [sic] or as proprietary concern or any partnership firm or in any private unlisted and listed company.
3. Has sufficient means to discharge his/her financial obligations.

Integrity, Honesty and Reputation

1. Has not been convicted in any criminal offence, involved in any fraud/forgery, financial crime etc.
2. Has not been subject to any adverse findings or any settlement in civil/criminal proceedings particularly with regard to investments, financial/business, misconduct, fraud, formation or management of a corporate body etc.
3. Has not contravened any of the requirements and standards of regulatory system or the equivalent standards of requirements of other regulatory authorities.
4. Has not been involved with a company or firm or other organization that has been refused registration/license to carry out trade, business etc.
5. Has not been involved with a company/firm whose registration/license has been revoked or cancelled or gone into liquidation.
6. Has not been debarred for giving religious rulings by any religious institution/body.¹⁸

AAOIFI has not developed a separate code of professional ethics for SSB members. The standard-setter does, however, discuss some relevant aspects, such as independence and objectivity, in its standard, Independence of Shari'a Supervisory Board. It has also developed codes of ethics for accountants and auditors of IFIs, as well as for employees. But since SSB members do not fall in either category, they require a separate code of ethics. As a result, in 2009 the IFSB published a code entitled Basic Professional Ethics and Conduct for Members of the Shari‘ah Board.

SSB members are not permanent employees of the IB, rather they are independent service providers and their relationship with the IB is built on trust. It is therefore important for them to be trustworthy and to protect the confidentiality of the institution, except when required to disclose such information according to professional standards or legal requirements. The terms of the contractual agreement of the SSB with the IB require directors, management, and employees to disclose pertinent confidential matters in order for the SSB to perform its duties prudently. It is thus the responsibility of each SSB member to maintain the confidentiality of such information, and not share it with unauthorized parties or individuals. If SSB members do not maintain the privacy and confidentiality of this information, then the IB could take them to court for breaching their contractual terms and revealing secrets of the institution. The IFSB code of ethics reminds SSB members that “[t]he duty to observe confidentiality applies to all information with which a member of the Shariah board is entrusted by the IIFS or which is brought to his or her attention during or at any time after the carrying out of his or her assignment.”¹⁹

SSB members must observe a high level of objectivity in the course of their duties. They are therefore required to maintain an “independent mental attitude” so that their judgments are impartial and not influenced by internal or external factors. It is thus their responsibility to safeguard themselves against situations that could affect their objectivity and lead to biased judgments.²⁰ Being objective is crucial to maintaining credibility; otherwise, stakeholders could cease dealing with the IB in the event that they deem the SSB to be lacking in credibility.

SSB members are also required to observe due diligence and professional care in performing their assigned duties. Besides being competent and maintaining such competence through continuous development, members must diligently discharge their responsibilities to the best of their abilities in line with Islamic teachings, the SSB code of ethics and conduct, standards for the profession and industry, and legal and regulatory guidelines. SSB members must be well aware of these, as ignorance of them is not a valid legal defense. In other words, observing due diligence and professional care is not only necessary because of Islamic teachings, but also to protect SSB members and the IB against legal action. The IFSB offers the following guidance:

While practicing his or her profession, a member of the Sharī‘ah board must have due regard to the legal as well as the ethical requirements of his or her profession … He or she shall always strive to:

1. uphold fairness and equity for all the stakeholders;
2. act in a manner that preserves his or her honesty and integrity;
3. exercise appropriate discretion in decision-making by taking into consideration not only the technical aspects of Sharī‘ah compliance; and
4. appreciate the diversity of opinions among various schools of thought and differences in expertise among his or her fellow members of the Sharī‘ah board.²¹

6.1.2 Academic Qualifications of SSB Members

A competent SSB member must be academically qualified to be able to provide the necessary sharī‘ah guidance; however, there is a lack of consensus in the industry on what constitutes sufficient qualifications for SSB members and the process of attaining these. Ghoul observes: “So far there is no official qualification process; usually a new scholar needs the recognition by more established scholars and a track record of research in Shariah law and preferably Islamic finance as well.”²² Nevertheless, AAOIFI expects SSB members to be:

well versed in fiqh (Islamic Jurisprudence), well informed of the contributions of diligent fiqh scholars, and [have] the ability to use the Shari’a-accepted methods of deriving reasonable rulings on emerging issues. He should also be known for his discernment, cautiousness and knowledge about the circumstances and traditions of people, and should always remain alert against the different traditions of people, and should always remain alert against the different means of human misbehavior. Competence in fiqh is usually manifested by the vast reputation of the scholar or his distinguishable contributions by the vast reputation of the scholar or his distinguishable contributions especially in the area of financial transactions performed by intuitions.²³

In its definition of an SSB, AAOIFI notes that “the Shari’a supervisory board may include a member other than those specialized in fiqh al-mu'amalat, but who should be an expert in the field of Islamic financial institutions and with knowledge of fiqh al-mu'amalat.”²⁴

The qualifications detailed by AAOIFI are insufficient, as they are neither comprehensive nor measurable. For instance, an SSB member who is well versed in fiqh al-mu'amalat but has inadequate understanding of banking is prone to issue incorrect fatawa that would hamper the progress of the IB.

The IFSB does a better job of outlining more detailed and comprehensive competence requirements for SSB members. With respect to academic qualifications, it advises that the following should be the minimum qualifications:

He or she must at least hold a bachelor's degree/ijazah from a recognised university in the sciences of Sharī‘ah, including Islamic transaction/commercial law (Fiqh al-Muamalat), and be able to demonstrate an adequate understanding of finance in general and Islamic finance in particular.

It is reasonable to expect a member of the Sharī‘ah board to have:

• strong skills in the philosophy of Islamic law (Usul al-Fiqh), as he or she must know exactly the appropriate Fiqh methodologies for deriving juristic opinions; and
• good knowledge of written Arabic, as he or she needs to be very conversant with the primary sources of the Sharī‘ah.²⁵

In contemporary Islamic banking, it would be quite difficult for an SSB member to possess the level of sophistication needed to issue sharī‘ah rulings for complex financial transactions with anything less than a doctorate degree. A bachelor’s degree as a minimum qualification for an SSB member opens the door for the induction of less competent individuals into SSBs. These individuals could negatively affect the market by issuing weak judgments that would shake the confidence of stakeholders in SSBs in general.

To examine the expected expertise of SSB members, Hassan et al. performed a survey of sharī‘ah advisers, sharī‘ah officers, and regulators in Malaysia and found consensus among respondents on the need to possess adequate sharī‘ah expertise. Respondents also reported a need for the SSB to have legal, business, economics, and accounting expertise:

In addition, respondents also reported a need to have sufficient knowledge of Islamic banking and finance practices (93%), a strong command of English (65%) and Arabic (74%), and networking ability (85%). The results depict an expectation that SSB members should have cross-disciplinary expertise to perform their duties. Al-Zarqa explains:

It is a basic requirement for those writing on the topic of Islamic economics in order to present Islamic solutions for economic problems that they should fully comprehend Islamic fiqh and its theoretical principles (usul al-fiqh) and also have full knowledge of Ijtihad, its rules and conditions. Likewise, the jurist must have an accurate and detailed understanding of the nature of economic activity and its problems so that his investigation of the issues will be sound and his judgments accurate. It is obvious that an accurate assessment of economic life requires a good understanding of the principles of economics, which will enable the jurist to analyze the issue at hand and precisely understand it. Only then can his Ijtihad proceed on a sound and reliable basis in order to know the ruling of the issue.²⁷

One may argue that standard-setting organizations do not need to specify the qualifications for SSB members, as it is the duty of regulatory authorities in different jurisdictions to issue “fit and proper” criteria for SSB members, just as they do for directors. In practice, however, most regulators have been vague on the qualifications of SSB members. For instance, the regulations of GCC countries such as Bahrain, Qatar, Kuwait, and UAE do not stipulate requisite academic or professional qualifications for SSB members.

Regulatory guidelines in Bahrain, which strictly follow AAOIFI standards, require IBs to establish SSBs; however, there are no specific qualifications stipulated for SSB members. In Qatar’s Financial Centre, the rulebook requires that “members appointed to the Shari’a Supervisory Board are competent to perform their functions as Shari’a Supervisory Board members taking into account their qualifications and previous experience.”²⁸ In Kuwait, the law again requires IFIs to devise SSBs, but does not mention competency requirements for members. Article 93 of CBK Law reads: “Each Islamic bank shall have an independent Shari‘ah Supervisory Board, comprised of not less than three members appointed by the bank’s General Assembly.”²⁹ A similar case can be found in the UAE. Saudi Arabia also does not have any qualification requirements, since regulators have adopted a hands-off approach to sharī‘ah governance; hence, there is no SSB requirement in the first place. Oman, a latecomer to Islamic banking, does a better job by providing the following “fit and proper” criteria for SSB members:

Members of the SSB with Shari’a background must be holders of academic qualifications in the field of Shari’a – minimum of bachelor degree – that include study in Usul ul Fiqh (Rules of Islamic Jurisprudence) and Fiqh al Mu’amalat (Islamic commercial jurisprudence) from a recognized institution. They should be able to demonstrate an adequate understanding of finance/banking in general and Islamic finance/banking in particular. They should be able to demonstrate an understanding of the legal and regulatory framework applicable to the functions of the Licensee […] Members of the SSB other than Shari'a scholars must be individuals generally recognized for their expertise in their respective field (e.g. economics, law, banking, accounting, finance, etc.) They should hold a minimum of master [sic] degree […] They should be able to demonstrate reasonable proficiency in English. It is recommended that they have some understanding of Arabic […] The SSB members should preferably come from diverse backgrounds in terms of areas of expertise, qualifications and experiences in order to enhance the depth and breadth of Shari'a deliberations at the SSB […] SSBs are encouraged to adopt the “Basic Professional Ethics and Conduct for Members of the Shari'a Board” as per IFSB Guiding Principles on Shari'a Governance Systems for Institutions Offering Islamic Financial Services, December 2009.³⁰

Bank Negara Malaysia (the Central Bank of Malaysia) has the following to say in this respect:

The majority of members in the Shariah Committee shall at least hold bachelor's degree in Shariah, which includes study in Usul Fiqh (the origin of Islamic law) or Fiqh Muamalat (Islamic transaction/commercial law) from recognized university. It is reasonable to expect the majority of members of the Shariah Committee should be able to demonstrate strong proficiency and knowledge in written and verbal Arabic, and have good understanding in Bahasa Malaysia and the English language. The Shariah Committee may comprise experts from relevant background such as finance and law, which could support the depth and breadth of the Shariah deliberations. However, these members must not form the majority of the Shariah Committee. The Shariah Committee preferably shall comprise members of diverse backgrounds in terms of qualifications, experience and knowledge.³¹

Regulations issued by State Bank Pakistan require an SSB member to have “knowledge of or at-least be familiar with the banking industry. Minimum qualification is Dars-e-Nizami. Higher education like M.A. Islamiat [Islamic studies], economics or in the discipline of banking and finance may be an added qualification.”³² But what does “having knowledge of” or “being familiar with” the banking industry entail? How is this criterion evaluated? Is it sufficient for the person to attend some seminars on banking to fulfill this requirement? Moreover, the curricula of Dars-e-Nizami and Masters in Islamiat do not contain courses addressing the Islamic financial system or the application of sharī‘ah to banking and finance. It is doubtful that such a graduate would have the capability and experience required to understand sophisticated issues relating to banking processes, policies, IT modules, and legal and regulatory requirements.

The work of the SSB is very specialized and requires members to be highly qualified to embark upon their duties. Members are generally expected to contribute their opinions to the discourse equally, such that no one member would dominate the discussion and issue rulings. In order for this to occur, an SSB member should more or less possess the same level of knowledge and research abilities as his/her compatriots. Otherwise, there is a risk of a more qualified member dominating the dialogue. In the contemporary educational system, a doctoral degree is generally awarded in recognition of a person’s abilities to conduct original academic research that would generate new knowledge and be published in peer-reviewed academic journals. The doctoral educational experience trains the individual to be proficient in conducting research and requires the person to actively engage their analytical powers and expand their knowledge of the discipline. For this reason, a doctorate requires a prerequisite of at least 16 years' education, in addition to the time spent in the program. A sharī‘ah jurist who sits on an SSB has to conduct original research to contribute his opinion to the conversation with other members before an Islamic ruling is collectively issued. It would, therefore, be unrealistic to expect anything less than a doctorate in Islamic jurisprudence, preferably with transactional jurisprudence as a specialization, as a minimum academic qualification for the individual to be competent in fulfilling their role. Generally, those without such a qualification would be unable to perform their responsibilities. Furthermore, they would be a burden on other SSB members as they would require additional time to understand issues and would add limited value given their restricted abilities. They could also be a hazard if permitted to affect the fatwa-making process with their conclusions, should they that have been arrived at in an erroneous manner.

The academic qualifications of a prospective SSB member need to be carefully evaluated, as not every sharī‘ah graduate, even those with doctoral degrees, is trained to perform the duties required of an SSB member. For instance, scholars who focus on Islamic history as a discipline would not have the required expertise in jurisprudence needed for the SSB role. Additionally, it is preferable for the individual’s doctoral dissertation to relate to an Islamic transactional topic, as this would demonstrate the breadth of exposure of the person to Islamic transactional scholarship, and would provide the jurist strong grounding in the literature that will prove beneficial when researching future transactional issues.

Besides a doctorate degree, the jurist must have sufficient understanding of banking operations. This could be confirmed by way of an additional degree or certificate(s) evidencing sufficient training on topics of relevance to SSB members’ responsibilities, such as finance, economics, accounting, and law. Claiming to have an understanding of banking without providing some proof would open the door for non-specialized jurists to enter the domain of those who are qualified and potentially cause disruption. This becomes problematic especially as the banking system continues to increase in complexity. Farook and Farook state: “There are also issues with even existing scholars in terms of their qualification and training to be effective in dealing with the complexities and linkages in a modern economy.”³³

A sharī‘ah jurist should by default be proficient in Arabic, as the person would not be capable of issuing Islamic rulings without returning to the Qur’ān and sunnah of prophet Muhammad (pbuh) – the primary sources, which were revealed in Arabic. Additionally, most of the fiqh scholarship is in Arabic, so there is a pressing need for the jurist to have strong command of the language. In the case of an SSB member who specializes in a field other than sharī‘ah, such as accounting, it would be preferable for the person to be conversant in Arabic. However, should he not be so, then that would not hinder the person from serving on the SSB. The reason being that the accountant would not endorse fatawa as he would not be qualified to do so, even if proficient in Arabic. Nevertheless, the person would still add value to the SSB by enlightening members about accounting issues that must be taken into consideration. While sharī‘ah resources are available in other languages, permitting jurists to depend on translations of original texts is dangerous as translators could misconstrue the text, impacting the jurist’s ruling, if the latter had not referred to the original text.

As far as English is concerned, it is highly recommended for sharī‘ah jurists to be proficient in the language, as it has become the medium of communication in banking. The challenge that arises when SSB members do not speak English is that communication with employees of the bank becomes difficult. Translating long and complex contracts into Arabic is not impossible, but it is time-consuming and expensive. For this reason, SSB members who are also proficient in English are highly sought after in the industry. The research results of Hassan et al. discussed earlier corroborate the assertion that English is an important competency for SSB members.

Commenting on how policies could play a role in enhancing the competency level of SSB members in the industry, Grais and Pellegrini say:

Ensuring the competence of SSB members and Shariah reviewers requires a multi-pronged approach. Short-term policies to increase the number of qualified Shariah advisors would include training activities in Fiqh al-Muamalat at the bank level, in specialized training institutes and other government-recognized or related organizations such as central banks. Fiqh al-Muamalat degrees could be created and promoted by providing grants and certifying universities. Concurrently, the abilities of Shariah advisors and reviewers would be certified. The process of certification would begin at the IIFS level where managing bodies would appoint SSB members according to established criteria on expertise, education and track record that would be spelled out in the articles of association. The background of SSB members would also be disclosed in accessible information venues, such as websites and annual reports. This process may be complemented by self-regulatory professional associations or national authorities who would enforce nationwide mandatory criteria. Similarly, a national registration process might be established along the lines of the certification of Shariah advisors implemented by the Securities Commission of Malaysia. This would have the additional advantage of a centralized and therefore standardized assessment of Shariah experts’ skills.³⁴

IBs have to play an active role in helping SSB members stay abreast of industry developments by sponsoring them to attend training and seminars. Beneficial programs are offered by organizations, such as AAOIFI, the International Centre for Education in Islamic Finance (INCEIF), etc. Several other academic and professional organizations also offer specialized training in non-sharī‘ah-related disciplines, such as accounting, that SSB members could also benefit from. Central banks may also wish to support such initiatives. For instance, in Malaysia, BNM has set up the Fund for Shariah Scholars in Islamic Finance to help scholars “enhance knowledge, research, talent and intellectual discourse in the field and to accelerate the pace of research to provide new insight and perspectives, as well as to provide the Islamic finance industry with a broader range of opportunities to tap the richness of Shariah to expand business.”³⁵

In view of the above discussion, there is a need for the industry to reexamine the academic qualification requirements for SSB members. Perhaps standards organizations could collaborate with regulatory authorities on such a project given the importance of the topic and its implications for the industry?

6.1.3 Experience

As important as academic qualifications are for sharī‘ah jurists, of equal importance is their practical exposure to the industry. Such experience is invaluable, as it presents them with real situations that move beyond hypothetical dialogue to practical issues. In addressing these matters, jurists are expected to take into account the legal and regulatory framework that governs IB activities, and the broader implications of their rulings on the industry. With respect to jurists’ experience and exposure, the IFSB advises:

The level of knowledge expected from a member serving on a Sharī‘ah board may vary according to the level of responsibility and the type of regulated activity to be carried out by the IIFS. However, a member of the Sharī‘ah board is generally expected to be able to display an understanding of:

1. the Sharī‘ah rules and principles that apply to the IFS’s proposed activities;
2. the general legal and regulatory framework that may apply to the functions that it would perform; and
3. the broad impact of introducing financial products to the market and the public generally based on the Maqāsid al-Sharī‘ah.

Preferably, only a member of the Sharī‘ah board who has at least three years’ experience of making Sharī‘ah pronouncements/ resolutions, or at least four years’ post-qualification experience in teaching or research in Islamic finance, should be appointed as Chairman of the Sharī‘ah board. He or she should be able to demonstrate specific skills in the financial services industry in accordance with the line of business of the IIFS; be it banking, capital markets or Takāful.³⁶

The above guidance does not recommend an experience requirement for an SSB member who does not chair the SSB, and this is a shortcoming that should have been addressed. Further, the minimum experience requirement recommended for the chairman of an SSB is questionable, as it is doubtful that such a person would be capable of leading the SSB’s activities. AAOIFI also fails to mention minimum experience requirements for SSBs, but broadly mentions conditions for fatwa issuers, such as competence in fiqh.

The regulatory guidelines of different jurisdictions vary regarding the minimum years of experience needed by SSB members. For instance, State Bank Pakistan requires a minimum of five years’ experience issuing religious rulings, but adds: “Relaxation in number of years of experience may be considered in case of experience as teacher of Islamic Fiqh in a reputable institution other than banking institutions, for a period of not less than three years with a proven track record.”³⁷ BNM does not list a specific a number of years of experience, rather it makes a more general statement: “every IFI is required to establish a Shariah Committee of which the majority shall comprise persons with appropriate qualifications and experience in Shariah,”³⁸ and “the Shariah Committee preferably shall comprise members of diverse backgrounds in terms of qualification, experience and knowledge.”³⁹ With respect to Saudi Arabia, again there is no experience requirement. Asaad observes: “The majority of scholars are academically specialized [in] ‘Fiqh’ (jurisprudence), and only a few in law or economics. About 90% of Shariah board members are graduates of Shariah institutions whereby the command of foreign languages (such as English) and banking experience is not a requirement.”⁴⁰ The Central Bank of Oman requires SSB members to have 10 years of experience, so long as this experience is attained by conducting research in Islamic jurisprudence, teaching, and similar activities: “Shari’a scholars must have accumulated overall experience of 10 years or more (in teaching, research, Fatwa issuance, etc.) to be eligible to become members of a SSB.”⁴¹ In a subsequent clause, the guidelines detail the years of experience needed of subject matter experts who are not sharī‘ah jurists: “Members of the SSB other than Shari’a scholars must be individuals generally recognized for their expertise in their respective field (e.g. economics, law, banking, accounting, finance, etc.). They should hold a minimum of master degree. They should have accumulated relevant experience of 15 years or more in the relevant field.”⁴²

The Islamic finance industry continues to suffer from a severe shortage of experienced sharī‘ah jurists. Moreover, many of the jurists on the market, who are willing to serve on SSBs, have not undertaken any serious training in banking. Al Omar and Iqbal observed: “A survey of the members of these boards would reveal that hardly any of these scholars has formal training in modern finance. This puts a serious constraint on the ability of Shari‘ah scholars to issue well-informed rulings on financial products and activities. The Shari‘ah scholars are themselves conscious of this difficulty.”⁴³ This is partly the reason why expert SSB members are much sought after by market players; the other reason is that they give stakeholders confidence since they have been in the market for some time and are considered trustworthy. According to research by Ünal, the top 20 SSB members collectively hold 621 appointments, with two members holding a record of 85 appointments each.⁴⁴ The top 10 SSB members alone sit on 450 out of 1141 SSBs, thereby representing 39.44% of the SSBs in the market.⁴⁵

The foregoing discussion suggests that regulatory authorities need to revisit the requirements for SSB members in order to promote strengthen sharī‘ah governance within their jurisdictions. Doing so would be a step toward protecting against the risks that could arise from the lack of such governance, as well as its consequences for the market and the industry. Regulators could, for example, give jurists who lack the necessary experience requirement permission to learn from more experienced jurists by serving as non-voting members for a minimum period of time prior to being inducted as full SSB members. Additionally, jurists may be required to register with the regulatory authority prior to serving on an SSB. The application process would require the individual to submit his/her credentials along with three letters of recommendation from peers in the industry who would confirm the person’s academic rigor and ability to fulfill the responsibilities of an SSB member.

6.1.4 Essential Skills for SSB Members

Much of the previous discussion on competency requirements of SSB members focused on the specialized skills that sharī‘ah jurists require; hence, this section focuses on the broader transferable skills that they would also need. SSB members are responsible for several duties, such as researching banking issues, reviewing product structures, policies and procedures and financing agreements, issuing fatawa, contributing to staff training, etc. To duly fulfill these responsibilities, SSB members require the following managerial skills:⁴⁶

1. Time management: Since SSB members have to fulfill multiple responsibilities towards the IB in order to aptly discharge their fiduciary duty, they must have excellent time management skills. This is especially the case in the fast-paced banking world, where IBs need to seize opportunities that arise before they are lost. IB projects, such as a new product or a syndicated financing deal, are managed according to strict deadlines that cannot afford any delays. SSB members have to do their best to ensure that projects are not delayed as a result of their inability to manage their time, as this adversely impacts the IB and has direct consequences on shareholder profitability. In practice, it has been observed that due to the busy schedules of SSB members, and because they serve on multiple boards, matters are not resolved in as timely a fashion as IBs would sometimes like. Since it is often difficult to follow up with all SSB members on issues, in practice the SSB usually designates a senior member or several of them to provide guidance on day-to-day issues, and present decisions to the rest of the SSB members for ratification during the periodic SSB meetings.
2. Discipline: SSB members are expected to demonstrate the highest level of discipline in performing their responsibilities in a complete, organized, and prompt manner. Such discipline is required not just of SSB members, but of any professional with responsibilities.
3. Planning: The SSB is required to plan its activities in order to ensure that it fulfills its duty of sharī‘ah supervision. Planning increases the efficiency of the SSB, helps it achieve its objectives, reduces the risks involved in the supervision process, and promotes the best use of available resources. Generally, the planning process includes the following steps:
   1. Ponder on the objectives and tasks to be accomplished
   2. Consider the available the resources
   3. Design the plan
   4. Execute the plan
   5. Evaluate the plan.
4. Communication: Good communication requires attentiveness, listening closely to what others have to say and respecting their right to speak, and actively engaging in the discourse via displaying interest, asking clarifying questions, and responding to inquiries. SSB members are required to communicate among themselves, and with other IB-related parties. Since executive management is tasked with implementing SSB decisions, it is important to confirm that they have a correct understanding of the guidance provided. To minimize misunderstandings, SSB members are required to articulate their decisions in clear and uncomplicated terms using reliable modes of communication.
5. Conflict resolution: The process of issuing a sharī‘ah ruling requires extensive jurisprudential discussion among the jurists of the SSB. It is inevitable that, at one point or another, at least one jurist would adopt an opinion that would not be in agreement with the others. Debate on the validity of opinions and their strength is healthy and necessary; however, jurists have to be careful not to allow such debate to lead to animosity that would hinder productivity. SSB members should therefore clearly outline the process for issuing fatawa, and adopt a procedure for resolving conflicts in a methodological, unemotional way.
6. Operating modern technology: As much of the communication that occurs in the contemporary world of banking happens over the internet, SSB members must be capable of operating basic computer programs such as Word, Excel, and PowerPoint, in addition to being accessible via email, telephone, and possibly even fax.

6.1.5 Professional SSBs

A professional SSB is one that consists of highly knowledgeable, experienced, and skilled members who perform the duties they are appointed for by shareholders in return for remuneration. Below are some key characteristics expected of this body of professionals:

1. Nurture ethical behavior: An SSB as a professional body has to conduct its activities using proper procedures and etiquette, while maintaining high ethical and moral standards. In this respect, it must be honest and fair in all its dealing with different stakeholders, such as shareholders, directors, management, and customers. It needs to illustrate these ideals by its actions, and promote their adoption.
2. Operate in a professional manner and maintain expertise: This body of jurists has to ensure that it understands the IB’s needs with respect to sharī‘ah governance, and advise accordingly. It must not only conduct its activities in a professional manner, but also maintain its expertise, as falling behind in the competence requirements mentioned earlier would have a negative impact on the SSB’s work and the IB.
3. Exceed expectations: Part of being an outstanding body of professionals is exceeding performance expectations. The SSB should strive to complete tasks before their due dates while keeping in consideration costs, and other important factors.
4. Share knowledge: A professional SSB body strives to share relevant sharī‘ah knowledge of Islamic banking products, guidelines, etc. with employees and directors in order to enhance awareness, and promote better sharī‘ah governance.
5. Display academic honesty: In conducting its work, the SSB has to ensure that it is impartial when researching issues and that it appropriately references its sharī‘ah rulings by providing necessary evidence from the Qur’ān and sunnah.

One suggestion for SSBs to help maintain standards for the profession is to establish a professional association that would advance the interests of its SSB members, manage them, and advocate new guidelines.

6.2.1 Systemized SSB Application Process

Potential Islamic jurists wishing to be licensed to serve on SSBs in Malaysia have to submit an application form that allows the regulator to formally examine the person’s competence level and experience using a structured approach. This systemized method is a preventative measure that aims to control for the quality of SSB jurists and protect against the negative consequences that could result from having unqualified candidates sitting on SSBs. The process provides transparency and does not leave the sharī‘ah dimension at the mercy of market players. Most other jurisdictions, however, have not established such a formal process for potential SSB members, due either to not having an interest in being involved in such a procedure, or deciding that it does not warrant dedicated attention. Nevertheless, in some jurisdictions directors are still required to present to regulatory authorities a list of proposed SSB names for approval, prior to their appointment.