Shari’ah governance practices in Islamic financial institutions: challenges in Sri Lanka

Abstract

Sri Lanka is amulti-religious countrywhere the majority is governed by Sinhalese in which the legislation for Islamic banking and finance was adopted by the Central bank of Sri Lanka in the history of banking. To govern Shari’ah practices, the Shari’ah board was established in Sri Lanka to supervise the governance practices of Islamic financial institutions to assure the stakeholders on the shari’ah governance practices. The objective of this paper is to explore the internal and external challenges in practicing Shari’ah governance in Sri Lanka. A data source of this research is based on primary data i.e. structured interview from selected sharia’h supervisory board members, in-house shari’ah advisors, and shari’ah scholars in Sri Lanka. The results of the study reveals that the existence of many challenges on practicing shari’ahgovenrnace in Sri Lanka such as absence of comprehensive regulatory framework, lack of skilled shari’ah scholars, and qualification of members of shari’ah supervisory board. The implication of this research is to direct the practitioners and policy makers to formulate shari’ah governance framework and streamline the entire governance structure in future.