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Corporate Governance in Islamic Banking

What are the Elements and Structures of Corporate Governance in Islamic Banking and how they differ from the conventional banking?

Solution Preview

Islamic Banking incorporates the basic beliefs of good corporate governance, stressing the three main areas of accountability, transparency and trustworthiness in accordance to the teaching of Islam.

It differs from conventional banking because equity participation, risk and profit-and-loss sharing arrangements form the basis of Islamic banking. With these financial arrangements, stakeholder relationships and ...

Solution Summary

Corporate governance in Islamic banking incorporates another layer of control through the requirement of Shari'a board or Shari'a supervisory board. The main function of the Shari'a board is to supervise and to ensure banks are not involve in the non-halal trading in their transactions. Banks are also prohibited from taking interest from their customers. People deposit their money in Islamic bank in the principle of risk and profit sharing, therefore, they will receive dividends rather than interest.