Shariah and regulatory approval
To the Muslim, it is Shariah which governs and regulates every aspect of his/her life. Shariah means literally “the way” or “the right path”. Shariah derives from the Quran (revelation from the creator to mankind) and Sunnah (the statements and actions of Prophet Mohammed).
The Sunnah is considered the second source of revelation, it is an exposition of the Quran by which its generalities are clarified and its intended meanings specified. Consequently, everything in the Sunnah is addressed in the Quran either by inference or by direct reference. The Sunnah in its entirety is collected and recorded in the books of ‘Hadeeth’ The study of Hadeeth is a highly developed and established science in its own right.
Today most institutions and banks have a committee of distinguished Scholars who, based on the Quran and Sunnah, decide if the products are shariah compliant or not. To operate within the Islamic finance universe, a bank or any other type of financial firm a company needs shariah approval. Certain jurisdictions have Shariah Advisory Councils in places such as Hong Kong and Malaysia. In other jurisdictions, a shariah board needs to be appointed by the company.
The Sunnah is considered the second source of revelation, it is an exposition of the Quran by which its generalities are clarified and its intended meanings specified. Consequently, everything in the Sunnah is addressed in the Quran either by inference or by direct reference. The Sunnah in its entirety is collected and recorded in the books of ‘Hadeeth’ The study of Hadeeth is a highly developed and established science in its own right.
Today most institutions and banks have a committee of distinguished Scholars who, based on the Quran and Sunnah, decide if the products are shariah compliant or not. To operate within the Islamic finance universe, a bank or any other type of financial firm a company needs shariah approval. Certain jurisdictions have Shariah Advisory Councils in places such as Hong Kong and Malaysia. In other jurisdictions, a shariah board needs to be appointed by the company.
