page_title: Islamic banking and finance
section_title: Sharia advisory councils and consultants
hierarchical_section_title: Islamic banking and finance / Industry framework / Sharia advisory councils and consultants
caption_attribution_description: English: Kota Kinabalu (Sabah): UMNO Building (in the building also Islamic Bank)
context_page_description: Islamic banking or Islamic finance or sharia-compliant finance is banking or financing activity that complies with sharia and its practical application through the development of Islamic economics. Some of the modes of Islamic banking/finance include Mudarabah, Wadiah, Musharaka, Murabahah, and Ijara.
  The Qur'an prohibits riba, which literally means "increase". Technically riba is the increase when liquid or fungible assets are exchanged other than at par value. The most prevalent example in today's economy is lending money at interest, for example an exchange of $100 cash now for $110 payable in a year's time, an increase of $10. Investment in businesses that provide goods or services considered contrary to Islamic principles is also haraam.
  These prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices. In the late 20th century, as part of the revival of Islamic identity, a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.
context_section_description: Because compliance with shariah law is the raison d'être of Islamic finance, Islamic banks and banking institutions that offer Islamic banking products and services should establish a Shariah Supervisory Board (SSB) — to advise them on whether or not some proposed transactions or products follows the Sharia, and to ensure that the operations and activities of the banking institutions comply with Shariah principles.
  According to various Islamic banking organizations some requirements for SSBs include: 
  that they be composed of jurists specializing in fiqh al-muamalat i.e. Islamic commercial jurisprudence, (Accounting and Auditing Organization for Islamic Financial Institutions, AAOIFI);
  their fatwas (legal opinions) and ruling be binding, (AAOIFI);
  that they  have at least three members, (Institute of Islamic Banking and Insurance);
  that their members not be employees of the financial institution they supervise;
  and be appointed and have their remuneration set by a "general assembly" rather than the institution's board of directors, (International Association of Islamic Banks).
  In addition, their duties should include: 
  calculating zakat payable by Islamic financial institutions, (AAOIFI);
  disposing of non-shariah-compliant income, (AAOIFI);
  advising on the distribution of income among investors and shareholders, (AAOIFI).
  Since the beginning of modern Islamic finance, the work of the Shariah boards has become more standardized.  
  Among the organizations that have issued guidelines and standards for Shariah compliance are the AAOIFI,  Fiqh Academy of the OIC,  Islamic Financial Services Board (IFSB) (2009). The guidelines and standards are not regulations though, and each Islamic financial institution has its own SSB, which are not generally obliged to follow them.
  However, their home country many have a regulatory organization that they are required to follow.
  As of 2013,  regulators in Bahrain, Indonesia, Jordan, Kuwait, Lebanon, Malaysia and Pakistan have developed guidelines for SSBs in their respective jurisdictions. Some countries, like Indonesia, Kuwait, Malaysia, Pakistan, Sudan, and the UAE have centralized SSBs (In Malaysia that SSB is called the  Shariah Advisory Council, and was set up at Bank Negara Malaysia (BNM).)  A number of Shariah advisory firms have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services.
caption: An Islamic bank branch in the UMNO building in Kota Kinabalu
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