Shariah: Literature Review

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CHAPTER 2 LITERATURE REVIEW 2.0 INTRODUCTION This section consists of the literature reviews which comprised of the following discussions. Firstly this chapter will explain the definition of Shariah followed by the discussion on Shariah compliance and the non-compliance. Thirdly, the literature reviews will also explain the Shariah board or committee looking into its frequency of meeting and number of shariah board. All the above will be the independent variables of the study. Lastly, the chapter will have the discussion on Islamic financial institutions since the sample or population of this study will focus on IFIs., Shariah literally mean pathway, path to be followed or clear way to be followed (Abdul Haqq, 2002). Thus Shariah is defined…show more content…
The rapid development of IFIs around the globe requires a standard to ensure that it is running accordingly. In order to ensure their transparency, comparability and fairness, a reliable financial reporting standard is needed to fulfil the accountability towards Allah (God) and society (Haniffa and Hudaib, 2007) Thus, there is need for governance, because it is a system by which company is govern, ie: directed and controlled (Cadbury, 1992). This is essential to ensure the smooth running of a corporation as a corporation consists of various departments and…show more content…
As an IFI, which it carry the name Islam, the governance that it needs to follow would be as per what Islam is govern by, that is Shariah. Shariah can be considered as the Islamic corporate governance. Islamic banks are exposed to a unique set of risks in addition to what traditional banks face associated with the need to comply with shariah. Islamic banks established an additional layer of governance known as shariah governance because these additional risks that they have to face together with the increase in accountability. (Chik M. N. , 2012) The key mechanism of Shari’ah governance is Shari’ah Supervisory Board (SSB,) which is a self-regulated governance mechanism that assists Islamic banks to manage their funds efficiently while at all times complying with Shari’ah (Khir et al., 2008). Progress towards shariah compliance and the non compliance of it by certain corporations under different industries

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