Shariah Governance Practices at Islamic Banks in Bahrain From Islamic Bankers’ Perspective

This study aims evaluate the level of Islamic banks’ commitment towards Shariah Governance in the Kingdom of Bahrain. This study utilizes both quantitative and qualitative research methods. A survey questionnaire filled up by 200 Islamic banks’ employees asking them about several aspects of Shariah governance practices at their banks was used to achieve the objective of the study. In addition, semi-structured interview was conducted with 2 Shariah scholars in the kingdom to compliment the survey results. The survey results reveal that 7 out of 9 questions in the questionnaire which are related to Shariah governance aspects as per the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)’s governance standards are practiced by Islamic banks in Bahrain. This is shown by the majority of the employees who answered “yes” for those questions. On the other hand, the majority of the respondents answered “no” for the 2 aspects of Shariah governance namely “Does the bank publish a chart which explains its governance structure including the Shariah Supervisory Board?”, and “Are the rulings of SSB at your bank legally binding?”. The interview results also reveal that Islamic banks in Bahrain are practicing most aspects of Shariah governance. Based on the findings, it can be concluded that Islamic banks in Bahrain are committed towards Shariah governance requirements. However, there are several aspects of Shariah governance that still need enhancement such as there is a need of creating a specific laws related to Shariah governance and a need of improving the current AAOIFI governance standards to allow the standards to be legally binding for all IFIs in the kingdom. The results of this paper can be an input for Islamic banking stakeholders in Bahrain such as the regulator and the banks’ management to make decisions to improve Shariah governance practice among Islamic banks in the kingdom. It also can be an input for the AAOIFI as the standard setter to improve its governance standards. This study also fills the gap in the current literature and serves as a reference for further studies in the area