Sharia Principles & Governance
Sharia Advisory and Supervisory Board which consists of independent world renowned Sharia scholars who advise and audit us on matters related to Sharia.
AlHilal/AUB understands the importance of maintaining adherence to Sharia. It is for this reason that we have formed our own Sharia Advisory and Supervisory Board which consists of independent world renowned Sharia scholars who advise and audit us on matters related to Sharia. Our products and services are offered under the gracious guidance of our Sharia Advisory and Supervisory Board, consisting of three of the world’s most prominent and respected scholars of Islamic Sharia.
Sharia governance is the most important feature of AlHilal Islamic Banking Services/ Ahli United Bank. Sharia governance is defined as a system whereby the Bank attempts and abides by the Sharia principles in all its activities. The main objective of Sharia governance framework is to ensure Sharia compliance at all the times and at all levels and that is to enable the Bank to be acknowledged as fully Sharia compliant by all aspects.
The key elements of Sharia governance framework of the Bank are as follows:
Sharia Supervisory Board
Sharia Compliance and Audit
The SSB is the ultimate authority within the Bank for all Sharia related matters. It ensures, through a comprehensive Sharia compliance and audit mechanism that the Board verdicts and Fatawa are strictly adhered to. In this regard the SSB is assisted by a Sharia Compliance and Audit Department.
The SSB reviews product papers, structures, policies and legal agreements and endorses their Sharia compliance. It gives Sharia decision on the matters/issues relating to all banking matters. The SSB prepares an annual report about Sharia compliance of the Bank for the shareholders (to be read at the annual general meeting) and submits its copies to the Board of Directors and management. The report contains the SSB opinion with regard to the following points:
1. Whether the Bank has complied with the Sharia rules and principles in its contracts, transactions, accounts and dealings and adhered to the pronouncements issued by the SSB.
2. Whether the income calculation and profit distribution mechanism has been examined for the appropriateness of the basis of allocation of profit between the equity holders and the investment account holders.
3. Whether the earnings which were declared as non-Sharia compliant have been set aside in a charity account which is under the supervision of the SSB.
4. A statement mentioning that the Bank’s Board of Directors and management are responsible for executing the pronouncements issued by the SSB.
5. An opinion on the overall Sharia compliance of the Bank.
Sharia Compliance and Audit’s main function is to build up Sharia compliance controls in all areas of the Bank. The Sharia Compliance and Audit works independently and reports to the SSB. It provides Sharia guidance and direction in day to day matters to the Bank’s management as per the resolutions of the SSB and escalates new issues to the SSB to seek their guidance and directives.
Sharia Compliance and Audit facilitates in ensuring compliance with Sharia guidelines (as manifested by Fatawa issued by the SSB) and Islamic banking stipulations of the Central Bank of Bahrain on a day to day basis in all its business activities, operations and transactions. For this purposes it reviews all the contracts, agreements, policies, procedures, products, process flows, transactions, reports (profit distribution calculation) etc, and raises issues to SSB for directives. To attain higher level of Sharia Compliance, it conducts Sharia audit of all executed contracts on quarterly basis (as per audit plan and checklists approved by SSB) and produces Sharia audit reports by examining the extent of compliance with Sharia principles, Fatawa, guidelines and directives issued by the Bank’s SSB.