Islamic Banking and Corporate Governance Practices
Summary
Islamic banking represents a distinct financial system founded on principles derived from Shariah law, emphasising the prohibition of interest (riba), avoidance of excessive uncertainty (gharar) and promotion of risk-sharing arrangements. Governance in this context extends beyond conventional mechanisms to include Shariah supervisory boards, which oversee product compliance and ensure alignment with ethical objectives. Research over the past decade has examined how these dual governance layers—corporate and religious—interact to shape decision-making, risk management and stakeholder engagement. Key themes encompass board composition, transparency, accountability and the integration of sustainability imperatives within profit-and-loss sharing frameworks. Scholars and practitioners alike are increasingly focused on how robust governance structures bolster financial stability, foster resilience during market disruptions and advance sustainable development goals. Practical applications range from regulatory reforms and enhanced board diversity to the establishment of specialised committees for sustainability and the adoption of digital technologies that comply with Shariah criteria.
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Islamic Banking and Corporate Governance Practices publication trend
The graph below shows the total number of articles in islamic banking and corporate governance practices across all publications each year (not limited to Nature Index journals).
Technical terms
Shariah compliance: Adherence to Islamic law principles in banking operations, including the prohibition of interest and speculative contracts.
Shariah Supervisory Board (SSB): A panel of qualified Islamic scholars responsible for certifying that financial products and activities conform to Shariah rulings.
Climate-related financial disclosure (CRD): Reporting that details an institution’s exposure to climate risks and the financial implications of environmental factors.
Environmental, social and governance (ESG) performance: A measure of a bank’s management and outcomes across environmental stewardship, social responsibility and governance quality.
Board sustainability committee (SC): A specialised sub-committee of the board charged with oversight of sustainability strategies and related disclosures.
External assurance (EA): Independent verification of non-financial reports, such as ESG or sustainability accounts, by a third-party auditor.
References
- Corporate governance structure and climate‐related financial disclosure: Conventional banks versus Islamic banks. Business Strategy and the Environment (2024).
- Sustainability Committee, External Assurance, and ESG Performance: Empirical Evidence From Banking Industry in Emerging Economies. Corporate Social Responsibility and Environmental Management (2025).
- Unleashing the power of artificial intelligence in Islamic banking: A case study of Bank Syariah Indonesia (BSI). Modern Finance (2024).
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