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Economy 
Vol. 6, No. 2, 76-81, 2019 

ISSN(E) 2313-8181/ ISSN(P) 2518-0118 
DOI: 10.20448/journal.502.2019.62.76.81 

© 2019 by the authors; licensee Asian Online Journal Publishing Group 

    
 

 
 
 
Composition and Working of the Sharia Supervisory Boards in Bahrain’s Islamic 
Banks 

 
Bhartesh Ramprakash Kasi1   

Najdat Mahmood2   

 

 
( Corresponding Author) 

 
1Head of Business Department, College of Business & Financial Sciences, Royal University for Women, West 
Riffa Kingdom of Bahrain. 

 
2Associate Professor, College of Business & Financial Sciences, Royal University for Women, West Riffa 
Kingdom of Bahrain. 

 
Abstract 

The global Islamic finance industry has grown rapidly in the last ten years recording an average 
growth of over 10 percent and is expected to touch USD 3 trillion by 2020. The Gulf Cooperation 
Council Countries, Iran and Malaysia; have been central to the success story of the global Islamic 
finance industry accounting for 83 percent of the market size. Even though Islamic finance covers 
a wide range of financial service segments, 75 percent of the global Islamic financial assets are 
held by Islamic Banks, which explains the general notion of equating Islamic finance with Islamic 
banking. Islamic banking refers to a system of banking, which is consistent and in compliance 
with Islamic law, also known as Sharia. It is seen as an alternative to western-based banking in 
Islamic countries. Even though many Islamic countries have in place a Sharia supervisory and 
governance framework for Islamic banks, it has often been commented that these frameworks are 
inadequate when it comes to addressing the issues and challenges confronting Islamic banks 
today. Previous researchers have specifically identified issues concerning the membership and 
workings of the Sharia Boards as one of the major challenges confronting growth of Islamic 
banks.  The purpose of this paper is to examine and comment on the constitution, composition and 
functioning of Sharia Boards within Islamic banks based in the Kingdom of Bahrain. 

 
Keywords: Islamic banks, Islamic finance, Sharia board, Sharia supervisory board, Sharia scholar, Bahrain. 

JEL Classification: G21; G28; G29; E58. 
 

Citation | Bhartesh Ramprakash Kasi; Najdat Mahmood (2019). 
Composition and Working of the Sharia Supervisory Boards in 
Bahrain‟s Islamic Banks. Economy, 6(2): 76-81. 
History:  
Received: 16 August 2019 
Revised: 19 September 2019 
Accepted: 22 October 2019 
Published: 12 December 2019 
Licensed: This work is licensed under a Creative Commons 

Attribution 3.0 License  
Publisher:  Asian Online Journal Publishing Group 
 

Acknowledgement: Both authors contributed to the conception and design of 
the study. 
Funding: This study received no specific financial support. 
Competing Interests: The authors declare that they have no conflict of 
interests. 
Transparency: The authors confirm that the manuscript is an honest, 
accurate, and transparent account of the study was reported; that no vital 
features of the study have been omitted; and that any discrepancies from the 
study as planned have been explained. 
Ethical: This study follows all ethical practices during writing.   

 

 

Contents 
1. Introduction ...................................................................................................................................................................................... 77 
2. Literature Review ............................................................................................................................................................................ 77 
3. Research Approach and Methodology ......................................................................................................................................... 79 
4. Findings and Discussion ................................................................................................................................................................. 79 
5. Conclusion and Direction for Further Research ....................................................................................................................... 81 
References .............................................................................................................................................................................................. 81 
 

 

 

 

 

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Contribution of this paper to the literature 
This study contributes to the existing literature by examining and comment on the 
constitution, composition and functioning of Sharia Boards within Islamic banks based in the 
Kingdom of Bahrain. 

 
1. Introduction 

The global Islamic finance industry has grown rapidly in the last ten years recording an average growth of 
over 10% (from USD 0.639 trillion during 2007 to USD 2.2 trillion by the end of 2016) and is expected to touch 
USD 3 trillion by 2020. The GCC (Gulf Cooperation Council) Countries, Iran and Malaysia; have been central to 
the growth story of the global Islamic finance industry accounting for 83% of the market size. Even though Islamic 
finance covers a wide range of financial service segments, 75% of the global Islamic financial assets are held by 
Islamic Banks, which explains the general notion of equating Islamic finance with Islamic banking. The other 
segments of Islamic finance industry includes the Sukuk (15%), Islamic funds (4%), Takaful (1%) and microfinance 
(1%) (GIFR, 2017). 

The Kingdom of Bahrain is considered to be the leading Islamic financial market in the gulf and the MENA 
(Middle East and North Africa) region, ranking number 2 among the top 15 countries in the ICD-Thomson 
Reuters Islamic Finance Development Indicator (ICD Thomson Reuters, 2017). The Kingdom also hosts the 
region‟s largest concentration of Islamic financial institutions. According to the EDB (Bahrain Economic 
Development Board), there are 25 Islamic banks in Bahrain, accounting for more than 13% of the Kingdom‟s total 
banking assets and growing from USD 1.9 billion in 2000 to USD 25.7 billion by December 2016 (Bahrain, 2017). 

In Islamic countries and in countries with large Muslim populations, Islamic Banking is increasingly seen as an 
alternative to conventional or western-based banking. Four factors in particular are seen as unique to Islamic 
banking (Imam and Kpodar, 2010).  

 Prohibition of interest (Riba). 

 Prohibition of maysir (games of chance) and of gharar (chance). 

 Prohibition of haram (illegal) activities. 

 Payment of part of bank profits to benefit society (zakat). 
Islamic banking refers to a system of banking, which is consistent and in compliance with Islamic law, also 

known as Sharia (divine rules). Sharia compliant or adhering to sharia means observing strictly what is permissible 
(halal) or staying away from the prohibited (haram). In order to assure an Islamic bank‟s stakeholders that the Bank 
is doing its business in a sharia permissible manner, the services of religious boards comprising sharia scholars 
known as Sharia Boards are employed (Aziz, 2012; Grassa, 2013). The Sharia Supervisory Board, which is peculiar 
to Islamic banks is considered as the principal component of the Sharia governance framework (Hamza, 2013). A 
Sharia Supervisory Board exists in addition to the usual governance structures, but its functions are mainly to 
certify and monitor financial contracts, transactions, and activities of an Islamic bank on behalf of stakeholders and 
clients to ensure that they are compliant with the Sharia (Alman, 2012). 

The risk of Sharia incompliance has serious consequence on the existence and development of the Islamic banks 
and the industry, thereby justifying the need for an effective sharia supervisory and governance framework.  

Over the last two decades, attempts have been made in a number of countries to develop a sharia governance 
framework for Islamic banks, in line with standards and guidelines issued by two international standard setting 
agencies, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), headquartered in 
Bahrain and the Islamic Financial Standard Board (IFSB), headquartered in Malaysia. 
 

2. Literature Review 
According to the IFSB, Sharia governance refers to a set of institutional and organizational arrangements 

through which an Islamic Financial Institution ensures that there is effective independent oversight of Sharia 
compliance over issuance of relevant Sharia pronouncements, dissemination of information and an internal Sharia 
compliance review (IFSB, 2009; Mizushima, 2014). In line with IFSB guidelines, the supervision and governance 
structure in Islamic Banks is expected to include a Sharia Supervisory Board (SSB), composed of qualified scholars 
in Fiqh al Muamalat appointed by shareholders and reporting to the board of directors, with the responsibility of 
certifying and monitoring financial contracts, transactions, and activities of a Islamic bank on behalf of stakeholders 
and clients to ensure that they are compliant with the Sharia; an internal Sharia review process, carried out by an 
independent department to monitor, evaluate and produce reports on sharia compliance; and; periodic Sharia 
reviews covering policies and transactions, which form the basis of the report of the Sharia Supervisory Board. 
(Mejia et al., 2014).  

Garas and Pierce (2010) commenting on the sharia supervision in Islamic financial institutions (IFI), observed 
that it can assume different forms at macro and micro levels in different countries. At the macro level, Sharia 
supervision could be conducted by national or regional Sharia Supreme Councils and at the micro level, it can be 
conducted by Sharia Supervisory Board, Sharia Consulting firms or a single Sharia advisor. He concluded that 
Sharia Supervisory Board is the most common form of supervision adopted in IFIs.  

Grassa (2015) in his paper “Shariah supervisory systems in Islamic finance institutions across the OIC member 
countries - An investigation of regulatory frameworks” reviewed the different practices and regulatory frameworks 
of Shariah supervision in IFIs across OIC countries. The findings revealed various shortcomings in the shariah 
supervisory system in most OIC countries which were linked to the regulatory framework, roles and 
responsibilities of the national Shariah authority and duties and attributes of the institutional Sharia Boards. To 
bridge these shortcomings, the paper proposed recommendations which were to do with enhancing the monitoring 
role of national Shariah authorities, improvising existing sharia governance framework particularly regulations in 
the area of independence of the board, number of board meeting, external sharia review, information disclosure in 
sharia reports and standardization of different shariah interpretations.  



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Hamza (2013) while comparing the decentralized sharia governance model of the Gulf Cooperation Council 
(GCC) and the centralized sharia governance model of Malaysia, concluded that in decentralized frameworks, it is 
difficult to achieve consensus in Sharia interpretation and manage properly the existing interest‟s conflicts, the two 
principal components of an effective sharia governance structure. The study emphasized the relative robustness of 
the centralized sharia governance system and cautions against the harmful effects of co-existence of both the 
systems at the same time leading to regional differences in the application of Islamic finance contracts and 
credibility of the Islamic industry. In a related study, Grassa (2013) opined that “even though the Southeast Asian 
sharia governance model looks to be most efficient and effective in achieving the Shariah compliant purpose than the GCC 
model, it cannot be considered the perfect Shariah supervisory model”.  

Hasan (2011) studied the state of Sharia governance practices in Malaysia, GCC countries and the UK in 
relation to five principle components of a good corporate governance which consist of independence, competency, 
transparency, disclosure and consistency. A survey questionnaire addressing the following areas - general sharia 
governance framework, regulatory framework, role of Sharia board, competence of SB, independence, transparency 
and confidentiality, operational procedures, general assessments of the SB; was administered to 80 IFIs, for which a 
response rate of 39% was recorded. The findings revealed significant diversities in sharia governance practices in 
the sample countries and shortcomings in the governance framework for which suggestions were provided. 

An empirical study was undertaken by Hasan (2012) to examine the influence of the dual-layer Sharia 
governance system existing in Malaysia. The findings of the study while reiterating the significant role of sharia 
boards and sharia review practices in a dual-governance system, pointed to the laxity through which sharia reviews 
were implemented by sharia boards, raising concerns about the quality of sharia reports issued by the Boards, thus 
emphasizing the need for an external sharia audit. Other significant findings of the study included the influence of 
the sharia board composition on the quality of decisions, influence of integrity, reputation and scholarly 
background of the sharia board members on accountability and independence.  

Wardhany and Arshad (2012) examined the role of sharia board governance structure specifically the 
responsibilities and authority of sharia board members by comparing the role of sharia board in Indonesia with the 
role of sharia board in Malaysia and Brunei Darussalam. Findings indicate that role of the Sharia Board in Malaysia 
and Indonesia do not differ significantly from one another if legislative, business environment conditions and 
proactive government role are not factored.  

Grassa and Matoussi (2014) in their paper on “Corporate governance of Islamic banks: A comparative study 
between GCC and Southeast Asia countries”, compared the governance system in GCC countries and Southeast 
Asia countries using a sample of 83 Islamic banks across four variable - ownership structure, board of directors, 
Shariah board and CEO attributes. Their study found significant differences in corporate governance structure of 
IBs in GCC countries and the Southeast Asia countries. Of particular interest was their findings on the sharia 
board characteristics between the two sets of countries, which were: 

 Shariah board of IBs in Southeast Asian countries were slightly larger than those in the GCC IBs. 

 Interlocking membership on the Shariah board is higher in GCC IBs than in Southeast Asian IBs. 

 Percentage of scholars with accounting and finance knowledge sitting on the Shariah board of IBs in GCC 
countries is higher than those in Southeast Asia IBs. 

 Shariah boards of IBs in GCC countries meet more frequently than those of Southeast Asia IBs.  

 Presence of women in the Shariah boards of Southeast Asia IBs, no woman was observed in the Shariah 
board of GCC IBs. 

 The average fees of Shariah boards are higher in GCC IBs than in those in Southeast Asia IBs. 
The authors attributed the several differences in corporate governance characteristics of GCC IBs and 

Southeast Asia IBs to economic, social and cultural and regulatory factors. 
An interesting study by Funds@Work during 2010 raised concerns about multiple board membership and 

shortage of sharia scholars, through these findings: 

 Top 20 Scholars hold 85 to 14 SB membership positions each. 

 Top 20 Scholars have 621 SB memberships; the remaining 260 Scholars have 520 SB memberships. 

 Top 10 Scholars hold 450 out of 1141 total SB positions and the top 100 have 953 SB positions. 
Farook and Farooq (2013) in their paper on “Sharia Governance, Expertise and Profession: Educational 

Challenges in Islamic Finance”, identify significant challenges facing the Islamic finance industry, viz., cost of 
sharia diligence process, conflict of interest, multiple board membership, sharia scholarship, sharia non-compliance 
risk and due process. The paper asserts that shortage of qualified sharia scholars is a major challenge that needs to 
be addressed through institutional, curriculum and certification process. 

Garas (2012) undertook an empirical study to identify the relation using OLS between the conflicts of interest 
in the Sharia Supervisory Board (SSB) in the Islamic financial institutions and six independent variables, which 
were the SSB executive position, the SSB remuneration, the relation between the SSB members and the Board of 
Directors (BoD), and the multiple memberships in Islamic funds, issuers of Islamic bonds, and companies trading in 
capital markets. The findings indicated that four variables (SSB executive position, the relation between the SSB 
members and the BoD, and the membership in Islamic funds and issuers of Islamic bonds) were significantly 
related to the conflicts of interest in the SSB. 

Nomran et al. (2017) undertook an empirical study to examine whether impact of SSB characteristics on IBs 
performance could be affected by size effects by using a sample of 25 banks and employing the random-effects GLS 
and GMM methods. Six SSB characteristics, viz., size, cross-membership, educational qualification, reputation, 
experience and change in the composition; were employed as explanatory variables, of which four SSB 
characteristics (size, cross-membership, educational qualification and change in the composition) were found to 
significantly affect the performance of IBs, when no size difference was factored. The finding varied when sample 
were re-grouped into subsamples of large and small banks, four SSB characteristics (size, cross-membership, 
reputation and experience) were found to play an important role in enhancing the performance of large IBs while 



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only (reputation and experience) significantly affected the performance of small IBs. This findings confirmed that 
the impact of SSB characteristics on performance is more for large IBs than small IBs. 

The authors also made a contentious conclusion based on the study findings which was that there was lack of 
sharia governance practices in small IBs in Malaysia and Indonesia. 

Mollah et al. (2017) examined whether the difference in governance structures affect the risk-taking and 
performance of Islamic and conventional banks. Using a sample of 52 Islamic banks and 104 conventional banks 
across 14 countries, the study concluded that despite cross-country variations and a general perception of a 
conservative approach to risk taking, it was evidenced that governance structures of Islamic banks facilitate Islamic 
banks to undertake higher risks and achieve better performance due to product complexities and transaction 
mechanisms. 

Sarea and Mohd (2013) noted in their study that Islamic banks in Bahrain were in full compliance with 
AAOIFI accounting standards. A similar finding was reported by Hidayat and Al-Khalifa (2018) who observed that 
Islamic banks in Bahrain practice most aspects of sharia governance outlined in the AAOIFI governance standards. 

In conclusion, even though many Islamic countries have in place a Sharia supervisory and governance 
framework, it has often been commented that these frameworks are inadequate when it comes to addressing the 
issues and challenges confronting Islamic Banks today (Grassa, 2013; Grassa, 2015; Hidayat and Al-Khalifa, 2018). 
Researchers (Grais and Pellegrini, 2006; Rammal, 2006; Khan, 2007; Farook and Farooq, 2013; Hamza, 2013; 
Hassan and Mollah, 2014) have specifically raised issues concerning the workings of Sharia Boards and its 
membership, viz. shortage of qualified Sharia practitioners, multiple board representation of Sharia Board members, 
potential conflict of interest, independence of Sharia Board, lack of standardization in Sharia Board rulings and 
sharia diligence; as some of the major issues and challenges confronting growth of Islamic banks. 

In light of the above review, this study seeks to examine the composition and working of the Sharia Boards 
within locally incorporated Islamic banks in Bahrain. 
 

3. Research Approach and Methodology 
An exploratory research design was employed in this study due to paucity of primary information in research 

literature (Hasan, 2011). Based on the suggestion by Creswell (2014) that studies aimed at exploring in detail a 
central phenomenon could benefit from purposive sampling strategies, this study used purposive sampling 
procedure, through which five locally incorporated Islamic banks operating in the retail and wholesale segment 
was shortlisted (as per the CBB’s licensed list of locally incorporated Islamic banks, there are six banks who operate in the 
retail segment).  

Given the nature of data requirements, in-depth interview method, specifically expert interview method was 
initially chosen for which a semi-structured interview schedule was compiled and used to direct the expert 
interview. In compiling the interview schedule, the following were consulted - AAOIFI Governance Standards for 
IFIs, No.1, IFSB Guiding Principles on Shariah Governance Systems for Institutions offering Islamic Financial 
Services, No.10, new Shariah Governance module of CBB (Central Bank of Bahrain) and findings from previous 
research studies in the area of Shariah governance. Expert interviews were conducted with two individuals, who 
were instrumental in providing leads for contacting the other three responding banks. Individuals who responded 
on behalf of the responding Islamic banks included members of the senior management (Vice Chairman, Executive 
Committee members, CEO and a Senior Management Committee member). 

The study made use of descriptive data analysis and content analysis to quantify, analyse and summarize the 
study findings. Previous research literature and relevant secondary information were accessed using ProQuest and 
internet 
 

4. Findings and Discussion 
4.1. Profile of Respondents  

Total assets for the five banks surveyed ranged from BD 75 million to BD 1589 million; with two banks (40%) 
in the „above BD 1000 million‟ category and equal representation from the remaining banks in the „less than BD 
100 million‟ (20%), between „BD 100 to 500 million‟ (20%) and between „BD 500 to 1000 million‟ asset categories. 
All the five banks surveyed were locally (Bahrain) incorporated Islamic banks operating in the retail (60%) and 
wholesale (40%) segment. Individuals who responded on behalf of their banks were members of the senior 
management, which included Vice Chairman (20%), Executive Committee member (40%), CEO (20%) and Senior 
Management Committee member (20%). 

In line with CBB directives and AAOIFI requirements, all surveyed banks (100%) reported to have established 
a Sharia Supervisory Board (SSB), the membership of which ranged from 3 members to 5 members. All surveyed 
banks complied with the minimum membership requirement which is 3 scholars.  

Of the 18 members (includes 2 members with cross-membership in two banks) who made up the SSB across the 
five surveyed banks, 75% (12 of 16) hold a Ph.D. of which, 83% was in Islamic jurisprudence and 17% in Islamic 
finance or economics; 2 hold a masters and a bachelor degree in Islamic sharia / Arabic literature and the 
remaining 2 hold a bachelors in economics / Islamic jurisprudence. In terms of nationality of SSB members, 38% (6 
of 16) are Bahrainis and the remaining (62%) non-Bahrainis, from Saudi Arabia, Kuwait, Egypt, Yemen, Algeria 
and Pakistan. Most of the SSB members hold multiple-SSB membership in regional and international Islamic 
financial institutions with 3 members associated in the capacity of SSB Chairman or SSB member in more than 10 
IFIs; 5 members associated in the capacity of SSB member in 5 to 10 IFIs and the remaining (50% of the members) 
with multiple-SSB membership ranging between 2 and 4. Further, all sharia board members in the surveyed 
Islamic banks were male, supporting the findings of Hasan (2011) that sharia boards in GCC and UK are male 
domains. Most of the SSB members of surveyed banks have a stellar track record in terms of their qualification 
(scholars in fiqh-al-muamalat), experience, exposure, recognition and contribution to the Islamic financial industry; 
thus fulfilling the AAOIFI, IFSB and CBB requirements and guidelines of appointing a reputable and credible 
sharia board, with at-least three members, trained in various schools of Islamic jurisprudence comprising of 
different nationalities and with varied experience. 



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All (100%) the surveyed banks reported to have in place a charter / terms of reference, which defines the scope 
of work for the SSB. There was agreement among the surveyed banks on the nature of issues stated in the charter, 
which includes - constitution, composition, appointment and replacement of SSBs and members; duties, 
responsibilities and authority of SSBs, reporting and relationship structure of SSBs. Again this finding is hardly 
surprising given the AAOIFI, IFSB and CBB requirements and guidelines in this regard. 

To the question as to how many meetings of the SSB were convened during the last financial year and on an 
average how many of these meetings were attended by each SSB member, two banks reported to have convened 3 
to 4 meetings of the SSB with attendance of 100% while 3 banks reported to have held between 5 and 6 meetings, 
with attendance of 75%. As per the new CBB regulations, SSBs have to meet at-least once on a quarterly basis and 
each SSB member must attend at-least three-fourths of the meetings during a calendar year to review and approve 
decisions relating to Sharia matters.  

Most (80%) of the surveyed banks report to offer a contract for appointment to the SSB for a minimum period 
of 3 years & beyond with one bank stating the same to be one year. None (100%) of the banks reported to the 
existence of mandatory rotation in SSB membership. Further, it is also found that banks don‟t report the benefits 
and remuneration offered to SSB members to general assembly, which is a requirement as per the new CBB 
regulation SG 2.4.2. 

Surveyed Banks were asked to rate on a scale of 1 to 4 a list of 9 fitness assessment criteria‟ for individuals to 
serve on the SSB. None of the 9 items received either a „low‟ or „not valued‟ rating. Responses ranged between 
„high‟ and „moderate‟ for all the 9 items. The following two items received the highest modal score of 4 – 
“possession of a bachelor degree in Islamic Sharia” and “strong proficiency in Arabic”. These findings are in line 
with the requirements of CBB (SG 2.4.4) and IFSB guidelines (2.1) which suggest that an Islamic bank must 
conduct a background check to verify that any person appointed as a SSB members should satisfy the following 
three competencies – academic qualification (holding at-least a bachelor degree in sharia including fiqh al-
muamalat), experience and exposure (experience in applying Sharia to a bank‟s proposed activities, awareness of 
applicable general legal and regulatory framework, experience of making sharia pronouncement) and track record 
(respectable character and conduct). 

To the question whether the bank offers any induction / training programs for SSB members in the areas of 
Islamic finance and accounting, 3 banks (60%) stated they sponsor their SSB members for ongoing seminars & 
conferences as part of their professional development. With the new CBB directive SG2.6.2, it is necessary for 
Islamic banks to offer appropriate induction and training programs for their SSB members. This finding is more or 
less in line with a similar finding reported by Hasan (2011) that slightly less than 60 percent of IFIs provided 
professional training especially in the matters of finance and banking to their Sharia board. 

To the question whether the bank assesses effectiveness of SSB and its members, all surveyed banks reported to 
assess the SSB as a whole and contribution of each member on an annual basis, with 40% stating they do it “to a 
great extent” and the other 60% stating they do it “to some extent”. 

This finding is in line with the guidelines of IFSB and CBB new directive (SG-2.7.1 & 2), which suggests that 
IBs should specify and adopt a process for assessing the effectiveness of the SSB and contribution of each member. 
This finding is also an improvement to a finding by Hasan (2011) who concluded that a significant number of IFIs 
don‟t evaluate or assess the performance of their Sharia board.  

A further related question on „do you use the results of this assessment for considering re-nomination and 
seeking resignation of SSB members‟ produced contrasting response, where 3 banks (60%) stated they use the 
performance evaluation for making key decisions “to some extent” and 1 bank reported to use the evaluation “to a 
great extent” and one bank reporting to “not using it at all”. 

With respect to having standard operating procedures (SOPs) for holding and recording of SSB meetings and 
decision making process, all surveyed banks (100%) reported to have SOPs in the following areas - request 
submission, holding and recording of SSB meetings, decision-making and review process of the SSB. However, 2 
banks reported these SOPs to be not very detailed. Further, all the surveyed banks (100%) reported to have in place 
a code of ethics and conduct for their SSB members, which is marked improvement over a related finding by Hasan 
(2011) which indicated that 26% of Sharia boards are not guided by a code of ethics. 

Surveyed Banks were asked to rate on a scale of 1 to 4, the extent to which stakeholders have access to 
information regarding SSB duties, decision making process, composition, competence and fatwas & reports issued 
by SSB. Modal scores for the given responses ranged from „seldom’ (for Decision making process of the SSB) to ‘most 
of the time’ (for Composition of SSB). Information on duties of SSB, competence of SSB members, publication of all 
fatwas / rulings / guidelines / reports issued by SSB were provided „some of the time‟. 

To understand the extent to which the often quoted concerns raised in research literature about composition 
and workings of the SSBs, Banks were asked whether a list of concerns presented to them posed a challenge and if 
so how were they managing them. 

 Shortage of qualified sharia practitioners in Fiqh al Muamalat - There was a unanimous opinion that there was 
indeed a shortage of qualified sharia practitioners, particularly in the area of Fiqh al Muamalat. Banks 
reported to managing this challenge by nominating non-Bahraini to SSB boards. 

 Sharia practitioners of different schools of thought - Opinions were divided among banks when asked to what 
extent they believe Sharia practitioners of different schools of thought pose a challenge. Two banks 
considered it a challenge while the other three opined that this diversity enriched the decision and thought 
process which is mutually beneficial for the industry and consumers. 

 Level of familiarity of Sharia practitioners with modern day banking services and sharia audit is limited - There 
was a more or less a consensus among Banks that most of the sharia practitioners on SSB are familiar with 
modern day banking services and audit requirements. 

 Multiple board representation of Sharia Board members - While conceding that multiple board representation 
of SSB members is a challenge, almost all Banks were of the opinion that this doesn‟t pose a problem to 
Banks as long as there is no conflict of interest. Formation of a central sharia bureau was one of the 
suggestion put forth for dealing with this challenge. 



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 Lack of standardization in Sharia ruling (fatwa) - There was a general agreement that lack of standardization 
in fatwa rulings was one of the challenges in Islamic banking. However, there was references to how the 
industry was moving towards standardization through the involvement of CBB and AAOIFI. 

 

5. Conclusion and Direction for Further Research 
In conclusion it can be said that Islamic banks in Bahrain, in line with AAOIFI requirements, IFSB guidelines 

and CBB‟s new SG module; have in place a sharia governance structure through a Sharia Supervisory Board, with 
clear terms of reference, operating procedures and a code of professional conduct thus supporting the findings of 
similar studies (Sarea and Mohd, 2013; Hidayat and Al-Khalifa, 2018) in this regard. However, there still seems to 
be lack and/or inconsistency in practices among banks concerning reporting of benefits and remuneration offered 
to SSB members, offering appropriate induction and training programs for SSB members and disclosing 
information on decision making process of SSB and publication of fatwas / reports issued by SSBs. Concerns raised 
by previous research on shortage of qualified Sharia practitioners, multiple board representation of Sharia Board 
members, potential conflict of interest, independence of Sharia Board, lack of standardization in Sharia Board 
rulings and sharia diligence; continue to be considered contemporary challenges, however it is noteworthy that 
Islamic banks in Bahrain have devised appropriate risk management strategies to deal with some of these issues. 

Even though the current findings could be generalized for the Islamic banking sector in Bahrain, future 
research with larger samples or complete enumeration methodologies could look into scale and segment effect in 
sharia governance practices among Islamic banks. Further, this study didn‟t explore the role and activities of the 
internal sharia unit and the nature of symbiotic relations with the SSB, which can be further explored. 
 

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muenchen.de/47772/1/MPRA_paper_47772.pdf. 
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