THE INDEPENDENCE OF THE SHARIAH COMMITTEE OF ISLAMIC FINANCIAL INSTITUTIONS IN MALAYSIA: LEGAL ANALYSIS

Shariah Committee is an advisory body established by the Islamic financial institutions which has a significant role in ensuring that the Islamic financial business carried out by the institutions comply with the Shariah principles. The independence of the Shariah Committee in discharging their duties and responsibilities is the essential element in ensuring the credibility of the institutions. In Malaysia, the government extremely emphasizes on the independent of the Shariah Committee established by the Islamic financial institutions as stipulated in the existing legislations governing such institutions. However, the question arises, to what extent the existing legislations have a provision dealing with the independence of Shariah Committee? By using legal research methodology, this article scrutinizes the existing legislations in order to answer whether it is sufficient to guarantee the independence of Shariah Committee in carrying out their duties and responsibilities. This article found that, Malaysia has a good legal mechanism in ensuring the independence of Shariah Committee. It is found that the appointment method to Shariah Committee, the decision on the remuneration of Shariah Committee, the position of the Shariah Committee in the organisation structure of Islamic financial institutions, the independence of Shariah Committee in issuing Shariah deliberation and the appointment of Shariah Committee to sit in the Board of Directors of Islamic financial institutions may invite a question on the independence of Shariah Committee in discharging their duties and responsibilities. Hence, the existing legislations need to be improved to guarantee the independence of Shariah Committee. (c) 2018 Published by Future Academy www.FutureAcademy.org.UK