Annex 6 to OIC/COMCEC/36-20/REP
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6. THE POLICY RECOMMENDATIONS OF THE 14 TH MEETING
OF THE FINANCIAL COOPERATION WORKING GROUP
The COMCEC Financial Working Group (FCWG) has successfully held its 14th
Meeting on September 15th, 2020 in virtual-only format with the theme of “Improving the
Shariah Governance Framework in Islamic Finance’’. During the Meeting, FCWG made
deliberations on improving shariah governance framework in Islamic finance sector in
the OIC Member Countries. Room Document, prepared in accordance with the main
findings of the analytical study conducted for the 14th Meeting of FCWG and the answers
of the Member Countries to the policy questions, was the main input for the discussions.
Accordingly, the participants have come up with some policy recommendations.
Policy Advice 1: Developing a comprehensive legal and regulatory framework for
the Shariah Governance processes and arrangements to ensure that all the
operations and business activities in Islamic Finance are in accordance with Shariah.
Rationale:
Islamic banking and financial market laws should contain the definitions of all currently
known and approved Islamic finance products and services as well as instruments. The
concerned law should stipulate the general rule of prohibiting trade in pure risk and debt.
The law may also authorize the regulator to add new products once they are approved.
Furthermore, a special standard for the listed companies and Islamic financial instruments
should be attached to the law with a stipulation of an annual review. Such standards
would set the required conditions for ensuring Shariah compliance. Besides, a handbook
on Islamic finance products and instruments should be issued by the regulators to support
and facilitate the implementation of the respective law.
Policy Advice 2: Encouraging the establishment of national Shariah Supervisory
Boards (SSBs) supervising the institutional SSBs.
Rationale:
National Shariah Supervisory Boards (SSBs) have various important functions. They can
play a very significant role in resolving the disputes between Islamic Financial
Institutions (IFIs) and customers. Furthermore, approving new products, supervising
IFIs on proper income purifications, reviewing yearly accounting of profit and zakat
calculations and their distribution, assessing and regularly reporting Shariah non-
compliance risks to shareholders and investment account holders are among the other major
functions of National SSBs. The National SSBs are very instrumental in securing the
interests of all stakeholders, not just shareholders.