[An interesting recent reuters article on the issue of so-called Shari`ah governance, an issue that has received significant attention, recently, in conferences and seminar within the sector.]
Controlling fatwa would harm Islamic finance By Jawad I Ali and Omar Salah
Recent developments in the Islamic finance market prompted the industry to rethink the role of Shariah scholars.
Most
Islamic financial institutions appoint a supervisory board or committee
of religious scholars who are tasked with reviewing their transactions
in order to ensure that they comply with the principles of Islamic
Shariah in their business and financial dealings.
A Shariah
supervisory board or committee approves or rejects a transaction through
the issuance of a fatwa (an opinion or proclamation about the Shariah
compliance of such a transaction).
The question of the day in the
Islamic finance industry is whether Shariah scholars should be subject
to some sort of supervision themselves.
In our opinion, the answer to this question depends on what is meant by ‘supervision’.
Industry
practitioners should oppose supervision if it means that Shariah
scholars would have to adhere to strict criteria or methodology before
issuing a fatwa. Such supervision would in our opinion curtail
innovation and transform the industry, prematurely, to a commoditised
industry, since Shariah scholars would in their attempt to check all the
boxes and stay within the accepted norms, refrain from covering new
ground and developing new structures that would allow new transactions
and thus the development of the industry.
The industry should not
lose sight of the fact that Shariah scholars are our current day
mujtahid (jurist). Throughout the history of Islamic jurisprudence, the
use of human reasoning (ra’y) has played an important part in the
development of Islamic Shariah.
When issuing fatwa, Shariah scholars
are practising ijtihad and they should enjoy complete freedom in their
practice of ijtihad; their guidance and limitations should only come
from the five sources of Islamic Shariah being: the Qur’an; Sunna (the
practice and traditions of the Prophet Muhammad (peace be upon him);
Qiyas (a comparison, used to make a judgement on issues which have no
clear-cut ruling in the Qur’an or the Sunna, by consideration of similar
issues which do have clear ruling); Ijtehad (the diligent judgement of
the scholars through reasoning and logic); and Ijmaa (a consensus or
agreement used for issues which require Ijtehad).
Therefore, in our
opinion, Shariah scholars should not be restricted or limited in their
practice of ijtihad by any regulator. Such regulation would neither
benefit the Shariah -compliance of the industry nor its further
development.
However, we would support supervision of Shariah
scholars such as the new proposed rules of the Accounting and Auditing
Organisation for Islamic Financial Institutions (AAOIFI) to reduce the
risks of conflicts of interest or improper disclosure.
This type of
supervision may lead to more transparency and benefit the authenticity
and credibility of both the industry and the Shariah scholars. Organisations
such as the AAOIFI should run training and continuing education
programs for would-be Shariah scholars. Such programmes should aim to
provide Shariah scholars with an understanding of various financial and
business transactions and the legal framework in which such transactions
are being consummated.
Most importantly, these training and
continuing education courses should train Shariah scholars to be
inquisitorial of the intention (niyya’) behind the transaction. - Reuters