Shariah Governance for Non-Bank Islamic Financial Technology: Regulatory Gaps and Prospects for Reform (Journal of Islamic Scientific Research)

Summary

• The study analyzes Shariah governance challenges facing non-bank Islamic financial technology platforms operating outside standard banking regulatory oversight.p.3
• Digital payments comprise 98% of the user base within surveyed regional fintech segments.p.10
• The international standard IFSB-10 lays out a Shariah governance structure built upon 4 governing principles.p.15
• Standardization updates in 2024 introduced 5 primary governance standards by AAOIFI to expand institutional coverage.p.17
• SAMA introduced its national Shariah governance framework in February 2020 for institutions offering Islamic financial services.p.17
• The research outlines a Shariah governance framework structured around 3 governing principles and 4 operational components.p.26

Key insights

1. Existing regulatory governance models are designed primarily for institutional banks rather than resource-constrained non-bank fintech startups.p.3
2. Digital payments represent 98% of total fintech users in the referenced regional financial ecosystem.p.10
3. Rapid technological deployment and automated execution exacerbate the risk of Shariah non-compliance in real-time transactions.p.12
4. Standard IFSB-10 defines systemic governance around 4 core principles: competence, independence, confidentiality, and consistency.p.15
5. In February 2020, SAMA established a regulatory baseline for Shariah governance across Islamic banking institutions.p.17
6. Uncoordinated scholar opinions create regulatory arbitrage and give rise to fatwa shopping among platform operators.p.19
7. Non-bank fintech governance should rest on 3 core pillars: disciplined proportionality, risk-based oversight, and maqasid-based alignment.p.22
8. Establishing a binding central Shariah authority is critical to standardize rulings and resolve fatwa divergences across platforms.p.23