03.11.2021, 13:33 73

The Role Of The Central Advisory Board For Shariah Governance İn Turkey

Islamic banking or participation banking started in Turkey in the 1980s. Participation banks had advisory/ Shariah committees operating within their own institutions and with their hired personnel. The decisions of these committees were only binding on their own institution.

There was no unity in the application of the standards due to the multi-decisions that caused confusion among customers. Considering the need for a Shariah governance framework, the Central Advisory Board was established in Turkey in early 2018 on the initiative of the Banking Regulation and Supervision Agency.

The advisory board carries out its administrative and scholarly activities based on the Communiqué on the Formation, Duty, Working Procedures and Principles of the Advisory Board 2018 and the Internal Directive on the Working Procedures and Principles of the Advisory Board 2018, both of which were adopted by the board of directors of the Participation Banks Association of Turkey (TKBB).

The main purpose of the advisory board is to determine the standards for
 
the transactions made in the field of participation finance in Turkey.

According to a statement by Prof Hasan Hacak during the AAOIFI webinar program with the agenda ‘Participation Finance Regulatory Framework in Turkey and AAOIFI Standards’, the general methodology of the board
in determining standards is to try to establish a balance.

On one side of the scale is the principle of the sector’s necessities and not blocked, while on the other side there is the concern that Islamic finance should not be a bad imitation with the principle of preserving its originality.

The advisory board determines the professional principles and standards of participation banking and has continued to take decisions and prepare standards for the sector since its establishment.
It also gives opinions within the scope of requests/questions delivered by participation banks and some public institutions and organizations through the TKBB.

The advisory board has currently published three standards on its website on the following: share certificates, Tawarruq and Murabahah. The standards scheduled to be published in the period of 2021–22 are as follows: suretyship
 
(Kafalah), Mudarabah, Musharakah and Wakalah.

In addition to the regular board meetings, the advisory board organizes workshops that bring together academy and industry practitioners every year
to participate in activities carried out in
cooperation with stakeholders.

Finally, Shariah governance, that is, the compliance of institutions operating in Turkey and their personnel with the principles and standards of participation banking, is a subject of particular emphasis. It is very important that  the  standards  of the Central Advisory Board are understood correctly and bank personnel are sufficiently equipped with an understanding of Shariah governance rules.

In this regard, TKBB and the Institute of Islamic Economics and Finance of Marmara University are carrying out a certification program that will contribute to the human resource development of the sector and standardize the activities. The certificate program, which started in 2020, has been conducted again in 2021 with the participation banks and relevant public institution personnel.

Source:  https://www.islamicfinancenews.com/

This article was first published in IFN Volume 18 Issue 44 dated the 27th October 2021.

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