Shari’a Governance Framework in Islamic Banking in Oman: Issues and Challenges
September 25th, 2018
By Muhammad Iman Sastra Mihajat, Ph.D
The most crucial challenge facing Islamic Banking Entities (IBEs) in the Sultanate of Oman, as the new comer in Islamic banking especially in the GCC Market, is to ensure the full compliance of the IBEs in planning, development, and implementation of the products, services, conducts of business and activities with Shari’a rules and principles. The main objective of this paper is to summarize the current practice of Shari’a governance framework of the IBEs in Oman in the face of the challenges faced by such institutions. In the meantime, Central Bank of Oman (CBO) has issued a proper Shari’a Governance Framework -the Islamic Banking Regulatory Framework (IBRF) of CBO. The framework designed by an expert and experienced team adopts best practices of Shari’a governance in GCC in particular and worldwide in general. The key elements of Shari’a governance framework shall contain Shari’a Supervisory Board, Internal Shari’a Reviewer (Head of Shari’a), Shari’a Compliance unit, Shari’a Risk unit, and Shari’a Audit unit. Not only that, to strengthen the role of Shari’a, the CBO also issued a regulation for the establishment of High Shari’a Supervisory Authority (HSSA) in the CBO to harmonize the opinion related to Shari’a matters among the IBEs. These elements are expected to perform an oversight role on Shari’a matters relating to Islamic banking business activities. This paper also discusses the issues and challenges faced by IBEs in Oman and proposes some improvement for the CBO in order to strengthen Shari’a governance framework in the Sultanate.