The Role of Sukuk in Islamic Capital Markets
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2.5.1 SHARIAH GOVERNANCE FRAMEWORKS (SGFs) AND A CENTRALISED SGF
The IFSB defines Shariah governance as “the set of institutional and organizational
arrangements through which the IIFS ensures that there is effective independent oversight of
Shariah governance” over each of the processes described in Figure 2.6.
Figure 2.6: Shariah Governance Processes
Source: IFSB (2009)
Shariah governance is regarded as the backbone of the Islamic finance regulatory and
supervisory infrastructure since the industry’s adherence to Shariah largely depends on the
effectiveness of Shariah governance itself. A vibrant and efficient Shariah governance system is
central to guaranteeing the fair, competent and transparent operation of Islamic finance, as
well as to support investors’ interests. Different countries adopt different organizational
structures in Shariah governance. There are at least 3 models available across the various
jurisdictions, as explained in Figure 2.7.
Figure 2.7: Models of Shariah Governance
Sources: BNM, ISRA