Corporate Governance 339
different and possibly competing IFIs, it may give rise to another potential
confl ict of interest. SSB members are required to combine a diverse set of
competencies, combining knowledge of Islamic law and commercial and
accounting practices. In practice, it would appear that very few scholars are
well - versed in both disciplines.
A further issue concerns consistency of judgment across IFIs, over time
or across jurisdictions within the same IFI. In essence, the activities of an
SSB are in the nature of creating jurisprudence by interpreting legal sources.
As such, there may be confl icting opinions on the admissibility of specifi c
fi nancial instruments or transactions. However, the diversity of opinions
is seemingly less widespread than would be expected. The Council for
Islamic Banks and Financial Institutions (CIBAFI) sampled about 6,000 fat-
was, and found that 90 percent were consistent across IFIs. The fact that
these had been issued by more than a hundred Shari’ah scholars around the
world suggests an overall consistency in the interpretation of the sources.^29
Nevertheless, as the industry expands, the number of confl icting rulings on
the permissibility of an instrument is also likely to soar if no efforts are made
to harmonize the standards. This may undermine the customer’s confi dence
in the industry and have repercussions on the enforceability of contracts.
The last and overarching issue relates to disclosure of all the informa-
tion relating to Shari’ah advisory. An objective of a stable Islamic corporate -
governance system is to enhance the soundness of Shari’ah governance. The
framework is enhanced by arrangements put in place by regulators and
the presence of providers of fi nancial - information services external to the
fi rms. In addition, public rating agencies aid prudent disclosure by fi ltering
out permissible investments and IFIs and are designed to create a positive
climate for Shari’ah - compliant investments. However, private mechanisms
for the external governance of Shari’ah - compliance are limited. Private rat-
ing agencies have not yet developed the necessary skills or found suffi cient
incentive to monitor compliance.
Concentration of Shari’ah scholars There is a dearth of qualifi ed Shari’ah
scholars in the market. In today’s complex fi nancial system, a person quali-
fi ed to determine the authenticity of fi nancial transactions requires in - depth
knowledge of not only Islamic Law but also needs to be well - versed in the
disciplines of economics, fi nance and banking. Reputable scholars are in
high demand and as a result they end up committing themselves to mul-
tiple Shari’ah boards, which raises concerns about their capacity to meet the
needs of existing and potential clients. The top 10 scholars currently occupy
more than 40 percent of all board positions at international organizations
and the top three scholars (Sheikh Nizam Yacoubi, Dr. Abu Guddah, and
Dr. Ali Elgari) are, between them, on the boards of more than 200 Islamic
funds. Table 15.1 lists the top 10 Shari’ah scholars and their affi liation with
either international standard - setting institutions or with the private sector.
This concentration of Shari’ah scholars reinforces the need to deal with the
issues of independence, confi dentiality and transparency discussed above.