Why Shariah scholars are key to Islamic banking growth

With the uptake of Islamic financial services going up by day, governments and financial institutions are increasingly tightening the operational environments to seal loopholes and guarantee seamless products and services.

Focus has been on structuring the operational architecture, by setting up several gate-keeping organs and systems. Islamic banking operates on the basis of the Shari’ah principles that promote sharing of risks and rewards between parties, prohibition of interest, abhors financing activities that contradicts the Shari’ah rules and regulations and forbids transactions clouded in uncertainties. One of the distinctive features in the provision of Islamic financial services is existence of a Shari’ah Supervisory Board (SSB) that comprises independent religious scholars and other experts in Islamic jurisprudence or Islamic commercial law. The directors or shareholders of the Islamic financial institutions cannot be members of the Shari’ah supervisory boards as dictated by Shari’ah governance standards. Providers of Islamic banking solutions have been keen to develop an operational infrastructure to meet regulatory procedures set by the Central Bank of Kenya. In October for example, KCB Group picked three Islamic banking experts to run the Bank’s Shari’ah Advisory Committee, ahead of the lender’s official launch of Islamic banking services. The practice of charging penalties on late payments by the Islamic financial institutions was a ruling arrived at by the scholars for the purpose of instilling discipline in customers who are negligent and fail to honour their financial commitments as expected. However, the penalties cannot be factored into the books of the financial institutions but should be diverted to charitable causes under the guidance of the Shari’ah supervisory boards. 
A widely adopted approach by the players in the Islamic finance industry is to have an internal and independent Shari’ah entities that certify their compliance with the Shari’ah tenets. Some jurisdictions like Malaysia, Indonesia, Pakistan and Sudan have central Shari’ah supervisory boards at the financial regulator’s level to play the significant role in the harmonisation and standardisation of Shari’ah scholars’ rulings and edicts (fatwas) and exercising oversight over the internal SSB of the industry players. 
One of the challenges facing the Islamic finance industry is the shortage of skilled manpower that includes the Shari’ah scholars who have a good grasp of both the Islamic jurisprudence and the dynamics of financial and commercial activities. The institutions of higher learning and other relevant agencies need to develop appropriate curriculum to address the capacity gaps in the provision of Islamic finance in a bid to make Kenya the Islamic financial hub in East and Central Africa.