The principles of Shariah governance as practiced by Islamic financial institutions

Shariah governance is a system by which Islamic financial institutions (IFI) ensure that there is an effective independent oversight of the Shariah compliance process. For some reason, Shariah governance is explored through its functional and organisational division rather than its fundamental background. The genesis of this field of research is somehow still lacking in effort as it is in its infancy. Currently, despite attempts have been initiated by some scholars, the members of the Islamic financial industry, whether they are practitioners, academics or policy-makers are giving more attention to industrial applications such as product structuring, managerial efficiency and market expansion. Without undervaluing those aspects of Islamic finance, this research is more interested in exploring the underlaying fundamentals of the Islamic finance namely on Shariah governance. To do so, this research applied doctrinal research method. The data is collected from documents relevant to research themes. It is then analysed inductively and deductively to formulate a fundamental epistemological characteristic of Shariah governance. As a result, this research emphasises that there are three main principles applied by the IFIs, the aqidatic worldview, Shariah compliance and akhlaq-based ethics. Those three fundamentals are then brought into real-world implementation through three mechanisms: the governing law, the Shariah supervision and the Shariah audit. The combination of those principles and their mechanisms has demonstrated a great deal of potential in terms of implementation as manifested by this research in the UK jurisdiction.