Sharı‘ah governance framework and perception of Islamic banking in Pakistan

Abstract EN

Purpose : globally commercialized Islamic banks were launched in1970s at middle east, Africa while in year 2002 at Pakistan.

as of 2019, there were 5 full-fledge Islamic banks operating in Pakistan and nearly all conventional banks have islamic windows.

Islamic banks captured more than 15.5% share of the total Pakistan's banking market and have far greater potential and capacity to take major share in the market.

methodology : researchers have examined state bank of Pakistan's sharı‘ah governance framework and compared it with the sharı‘ah governance framework of Malaysia, in light of ifsb guidelines.

based on key findings, focused group interviews of sharı‘ah scholars were carried out to get their perception about the sharı‘ah compliance and effectiveness of sharı‘ah governance framework in Pakistan.

findings : the study focused on 5 key components of a good governance system, independence of sharı‘ah board, competence, confidentiality, consistency and disclosure requirement.

the study revealed that Pakistan's sharı‘ah governance system is compliant with ifsb guidelines and comparable with Malaysian model.

significance : this study is a unique study in the context of Pakistan.

the finding of this research study will provide a comprehensive over view of the sharı‘ah governance framework (sgf) and perception of the sharı‘ah scholars on sgf.

the study findings may be useful for Islamic banks and other institutions using Islamic mode of financing.

limitations: the study was conducted on a limited sample size mainly from Karachi however the study may be replicated on a bigger sample size and including other cities while the number of conducted interviews can be increased if we go for pan Pakistan as they were only 15 dues to limitation of city as Karachi.

practical implication: the sharı‘ah scholars have positive opinion and shown satisfaction on sharı‘ah governance system and effectiveness of sharı‘ah controls.

the study results can be used to improve public perception about sharı‘ah compliance of Islamic banking system in Pakistan.