Department of Civil Law, International Islamic University Malaysia (iium), Malaysia
Associate Professor, School of Business and Economics, Universiti Brunei Darussalam, Brunei
Professor, Department of Economics and Finance, College of Business Administration, University of New Orleans, New Orleans, la, usa
This article examines the occurrence and legal implications of ‘fatwā shopping’ in the Islamic finance industry and the need to put the proper legal mechanisms in place to regulate the phenomenon. It provides a case study of the existing legal restrictions in some jurisdictions with a centralised Sharīʿah Supervisory Board at the national level such as in Malaysia. As a preliminary review of the implications of ‘fatwā shopping’ in the industry, this study examines the consequential problems, current perceptions and prospects of such practice. The study finds that instances of ‘fatwā shopping’ are common in cross-border Islamic finance transactions such as cross-border ṣukūk transactions where there is less regulation.
H. Askari, Z. Iqbal, and A. Mirakhor, Globalization and Islamic Finance: Convergence, Prospects, and Challenges (Singapore: John Wiley & Sons (Asia) Pte Ltd., 2010). Grais and Pellegrini enumerate five functions of a ssb: 1. Certifying financial instruments for their compliance with Sharīʿah; 2. Verifying transactions for compliance with Sharīʿah; 3 Calculating zakah payable by Islamic financial institutions; 4. Disposing of non-Sharīʿah compliant income; 5. Advising on the distribution of income among investors and shareholders. See W. Grais and M. Pellegrini, ‘Corporate Governance and Shariah Compliance in Institutions Offering Islamic Financial Services’, World Bank Policy Research Working Paper 4054 (Washington, dc: World Bank, 2006).
M.S. Malik, A. Malik, and W. Mustafa, ‘Controversies that Make Islamic Banking Controversial: An Analysis of Issues And Challenges’, American Journal of Social and Management Sciences, 2(1) (2011): 41-46.
W. Grais and M. Pellegrini, ‘Corporate Governance and Sharīʿah Compliance in Institutions Offering Islamic Financial Services’, World Bank Policy Research Working Paper 4054(Washington, dc: World Bank, 2006), 9.