Financial Crime World

Establishing a Robust Internal Shariah Governance Framework for Islamic Banking

The Afghanstan Da Afgani Stan Bank (Central Bank of Afghanistan) has issued a comprehensive National Shariah Governance Framework (NSGF) to ensure the sound and robust governance of its Islamic banking operations. The framework is designed to provide a clear structure for the bank’s Shariah compliance function, enabling it to effectively manage Shariah risks and maintain the highest standards of integrity.

Key Components of the NSGF

The NSGF consists of four key functions:

  • Shariah Research Unit: Conducts research on Shariah issues
  • Shariah Review Unit: Reviews compliance with Shariah principles
  • Shariah Advisory Unit: Provides advisory support to management
  • Shariah Compliance Unit: Ensures continuous assessment of Shariah compliance

Accountability and Responsibilities

The Board of Directors is ultimately accountable and responsible for the adaptation and implementation of the NSGF within the bank’s governance structure. The Board will perform diligent oversight over the effective functioning of the NSGF and may intervene or enquire into the operations of the Bank in cases where it has reason to believe that the Bank has carried out any activity that is non-compliant with Shariah principles.

Shariah Governance Structure

The Shariah governance structure includes a Shariah Board, which will be responsible for providing guidance and oversight on Shariah compliance matters. The Shariah Board will also provide advisory support to management on Shariah compliant operations in accordance with decisions and rulings issued by the Board.

Timetable for Development of Functions

The timetable for the development of the functions outlined above will be determined by the Shariah Supervisory Body (SSB), taking into account the development of Islamic business activities of the Bank and Islamic finance in Afghanistan in general.

Conclusion

The NSGF is a critical component of the Afghanstan Da Afgani Stan Bank’s governance structure, designed to ensure the bank’s compliance with Shariah principles and maintain its reputation as a leading Islamic financial institution. The framework provides a robust structure for the bank’s Shariah compliance function, enabling it to effectively manage Shariah risks and provide high-quality Shariah compliant products and services to its customers.