Sharī‘ah Governance and Sharī‘ah Non-Compliance Risk Management: A Maqāsid Sharī‘ah Based Appraisal

Abstract

The current study aims to explore the Sharī‘ah Governance (SG) and the management of Sharī‘ah Non-Compliance Risk (SNCR) in Islamic Banks (IBs) of Pakistan through the lens of Maqasid Sharī‘ah. For this purpose, the content analysis method was employed on the Sharī‘ah Governance Framework (SGF) issued by the State Bank of Pakistan (SBP), by concerning the related literature. Content analysis revealed that SGF explicitly defined the roles and responsibilities of various organs of SG of IBs towards sharī‘ah compliance. Moreover, the study also revealed that IBs were exposed to SNCR whenever they failed to comply with Sharī‘ah and consequently, SNCR lead to such a situation that threatened the stability and viability of IBs. The findings of this paper suggested that the viability and stability of IBs, as one of Maqāsid Khassah of the Islamic financial system, is being fully realized through different SG mechanisms provided in SGF, which strengthened the overall sharī‘ah compliance environment of IBs in Pakistan. It was also confirmed that different Maqasid Sharī‘ah, such as transparency, protection and growth of wealth, equity and justice in return distribution, and two dimensions of the well-being of society from the perspective of Maqasid Sharī‘ah, namely, safeguarding religiosity and safeguarding wealthwere being realized through SG mechanisms of IBs in Pakistan.