Proceedings of 24th International Business Research Conference
12 - 13 December 2013, Planet Hollywood, Las Vegas, USA, ISBN: 978-1-922069-37-5
Shariah Committee Effectiveness in Malaysian Microfinance
Institutions
Bashir Mande and Sahiba A. Ammani
Purpose: The objective of this paper is to examine the covenants and processes
affecting the operations of Shariah committees in promoting Islamic microfinance,
based on Shariah spiritual values.
Methodology: From reviewed sources and semi-structured interview data, the
study explores qualitative approach to analyze the position of interviewed
stakeholders on Shariah committee and governance framework for Islamic
microfinance institutions.
Findings: Using classical governance examples of Islamic caliphates and current
guidelines as benchmarks, the analysis in the paper shows that the current
governance mechanisms as nurtured in the roles of Shariah committees for
microfinance providers is modestly rated well as potentially effective. However,
factors which infringe on the partial effectiveness of the Shariah committee and
the applicable governance mechanisms have been identified as independence;
competence in scholarship; financial benefits result in conflicts of interests.
However, the Shariah committee is perceived by relevant stakeholders as
worthwhile to assisting microfinance institutions and providers of micro-funds in
achieving appropriate and distinctive governance. Hence, Shariah committees
ensure firms consider accountability to the creator, in addition to protecting the
rights of all parties directly involved in the transactions. In addition, rights of other
non-contractual parties in the community with stakes have to be considered as
well. Therefore, to sustain Islamic micro-enterprises, alleviate poverty or protect
clients, Shariah spiritual values are required in the governance mechanism.
Paper Type: Research Paper
Keywords: Islamic corporate governance, Microfinance, Clients, Shariah spiritual values
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Bashir Mande, School of Accountancy, College of Business, Universiti Utara Malaysia, Malaysia.
Email: bashirmande@gmail.com
Sahiba A. Ammani, School of Accountancy, College of Business, Universiti Utara Malaysia, Malaysia.
Email: saibaammani75@yahoo.com