Publication:
Shariah supervisory committees in Bangladesh: practices, issues, and policy recommendations
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Date
2025
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Abstract
This paper evaluates the effectiveness of Shariah Supervisory Committees (SSCs) in Islamic Banks and Finance Companies (IBFCs) in Bangladesh, including full-fledged Islamic banks as well as Islamic branches and windows of conventional banks. SSCs are mandated to ensure Shariah compliance; however, recent crises among several IBFCs have raised questions about whether they are effectively fulfilling this role. Using content analysis of regulatory requirements from Bangladesh Bank and semi-structured interviews with SSC members, boards of directors (BoD), Shariah secretariat officials, senior bankers, and regulators, the study benchmarks practices against international standards (AAOIFI and IFSB) and triangulates findings with feedback from seminars and peer discussions. The research focuses on SSC composition, independence, meeting frequency, Shariah audit coverage, remuneration, disclosure practices, and member contributions. It finds that while SSCs are formally embedded in governance structures, significant variations and challenges persist, including limited independence and weak deliberations and disclosures. Theoretically, the study contributes by applying agency theory and institutional theory to explain how board oversight, independence, and regulatory pressures shape SSC effectiveness. Empirically, it documents gaps that may undermine Shariah compliance and stakeholder trust. Policy recommendations are provided, including independence safeguards, structured remuneration, external Shariah audit, centralized guidance, and Continuous Professional Development (CPD), to align Shariah governance of IBFCs in Bangladesh with international best practices and strengthen their credibility. Given the evolving nature of the Shariah governance framework (SGF) in Bangladesh, the data collection, findings, and analysis reflect the institutional and regulatory context up to March 10, 2025.
Keywords
Islamic Bank , Shariah Governance , Shariah Supervisory Committee (SSC)
Citation
Hossain, M. M., & Ahmed, M. U. (2025). Shariah supervisory committees in Bangladesh: Practices, issues, and policy recommendations. A Journal of Banking & Finance, 50(2), 55-91. https://doi.org/10.64204/BP1019-7044/50(2)/A20253
Publisher
Bank Parikrama
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Shariah_supervisory_committees_in_Bangladesh_practices_issues_and_policy_recommendations_Md. Mahabbat Hossain_Mezbah Uddin Ahmed.pdf
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