One of the main principles and features of Islamic banking, they don’t give nor deal directly with money, rather they share-in projects according to different Sharia methods as murabaha, musharakah, mudharabah, ijarah, etc. Moreover, they don’t accept, acknowledge nor take interest as it would be “riba”. A strictly prohibited increase in the money given in any form of a loan.
Islamic banking, moreover, is of a different important characteristic stemming from the fact that all banking transactions shall be thoroughly studied and fully approved by a special Sharia Board in each Islamic bank. This Sharia Board is composed of Sharia jurists mainly specialized in Figh al-muamalat and related Sharia studies. Every banking transaction shall be presented by the management / concerned depts. in the bank to the Sharia Board. Herein comes the role of the Sharia Board, the approval or disapproval of transactions with respect to the “Golden Principles of Sharia” from the Holly Quran or Hadith from Prophet Mohamed PBUH. In other words, Sharia Board must specify in clear words if the transaction is acceptable “Halal” or unacceptable “haram”, from Sharia perspective. This is the core point in Islamic banking all through.
Role of the Sharia Board is extremely necessary as it gives the necessary authority for the bank to process the transaction or otherwise. This is generally known as “fatwa”, Sharia opinion / advice. In some instances, the management may be interested in a certain lucrative deal for certain reasons, however, it will never take place if the Sharia Board didn’t give the necessary favorable authority / approval “fatwa”. Herein, the role of the Sharia Board is imperative and unquestionable by the management of the bank.
However, as a matter of procedure, the Sharia Board shall explain the reasons for approval or disapproval of any transaction, this will help in educating others and explain the Sharia guidelines and principles. Now, due to this, there is good literature about Islamic transactions and their authority form specialized authorized bodies.
The Sharia Board shall represent different schools of Sharia jurisprudence and schools of Islamic thoughts. This will broaden the work and opens the room to apply interpretations given by all grand Sharia Jurists. Islamic rules are wide and diversified, the openness will be a better advantage to promote Islamic banking all over.