There are two major corporate finance issues in the Islamic finance industry. Firstly, the responsibilities of the Shariah board and who they should report to; and secondly the role of the investment Mudarabah depositors as stakeholders. As these are unique concerns for Islamic finance they have not concerned the wider finance industry, although arguably they should be of concern to conventional banks offering Islamic windows.
The profile of governance issues in Islamic finance has been heightened thanks to the efforts of the Islamic Finance Services Board in Kuala Lumpur and Hawkamah, the corporate governance institution for the Middle East, based in Dubai. The work they have undertaken in this area is commendable, and in the longer run it may influence thinking in the wider finance industry.
RODNEY WILSON
Emeritus Professor, Durham University UK and Visiting Professor, Qatar Faculty of Islamic Studies
The global financial crisis has clearly shown that best practice corporate governance standards did not have the desired result. It can even be concluded that perhaps we were collectively lulled into a false sense of security because of it. The failures in the financial industry have drawn renewed attention to corporate governance in general, and although it has been suggested that the crisis would not have happened if the principles of Islamic finance had been adhered to, this is by no means a certainty. Islamic financial institutions are equally prone to failure, as has become painfully clear from a number of troublesome situations involving Islamic financial institutions.
DR NATALIE SCHOON
Principal consultant, Formabb