Effectiveness of Shari’ah supervisory boards in Sri Lankan Islamic financial institutions

Abstract

The Success of Islamic financial institutions depends mainly on good governance and this governance relies mainly on effective Shari’ah Supervisory Boards. If Islamic financial institutions fail to ensure compliance with the Shari’ah rules, their position in the market will be affected negatively due to lack of customers confidence. Therefore, this study is carried out under the topic “Effectiveness of Shari’ah Supervisory Boards in Sri Lankan Islamic financial institutions”. This study aims to evaluate the effectiveness of Shari’ah Supervisory Boards in the context of Sri Lankan Islamic financial institutions. This qualitative study has utilised the data collected from both primary and secondary sources to answer the research questions through the content analysis method. Accordingly, Primary data has been collected by semi-structured interviews with individuals of Sharia Supervisory Board of Sri Lankan and discussions with other Professionals and officials of Islamic financial institutions. Secondary data has been collected from review of literature on Shari’ah governance of Islamic financial institutions from books, previous researches related to the subject, articles, official websites and annual reports. Findings of this study show that the effectiveness of Shari’ah Supervisory Boards of Sri Lankan Islamic financial institutions are appreciable, but they all need more efficiency. Effective measures taken by Shari’ah Supervisory Board to strengthen Shari’ah Supervision of Islamic financial institutions seems to be acceptable. Anyhow, they need to develop their functions more to increase their effectiveness. Forming a national Shari’ah body to regulate the Islamic financial institution would be an effective solution for the existing issues. It is believed that this study would be a useful reference for future researches in the relevant area.