Factors affecting the credibility of islamic banking Sharī’ah approvals: Perception-based empirical study

Abstract

Islamic banks cannot launch any operations and offerings unless a Sharī’ah approval is issued from their respective Sharī’ah boards. Hence, it becomes of utmost important and useful to find out the factors that affect the credibility of Sharī’ah approvals. To achieve this objective, first, six factors, namely, the methodology, format, product manual (istiftā), the role of Islamic banks as petitioners (mustaftī), the role of the Sharī’ah board, and the role of Sharī’ah governance framework, have been extracted from the relevant literature. Next, regression analysis is carried out based on the responses of 1000 Sharī’ah scholar respondents collected through a well-structured questionnaire to confirm the role of the identified factors in establishing the credibility of Islamic banking Sharī’ah approvals. The results indicate that all of these factors are the core factors affecting the credibility of Islamic banks' Sharī’ah approvals. The study recommends that the Islamic banking division of the State Bank of Pakistan should develop proper guidelines in this regard.

Keywords

• Sharī’ah approvals
• Fatwā
• Sharī’ah governance
• Islamic banking