Keywords
Sharia standards
Islamic banks
Sharia Supervisory Boards
transparency of Islamic banking operations
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Abstract
Currently, there are over 300 Islamic banks operating worldwide. The number of Islamic windows at second-tier banks is steadily increasing. The expanding Muslim population has contributed to a rising demand for Islamic financial products. In the academic literature, the origins of Islamic banking are generally traced back to 1963, when the first experience of such financial activity was tested in rural Egypt, subsequently spreading globally. This growth has resulted the establishment of more than 700 Islamic financial institutions operating in over 60 countries. Such a scale warrants further examination of the questions related to compliance with the fundamental principles of Islamic economics. Therefore, the purpose of this article is to examine the compliance of Islamic banks in Arab countries with the principles of Islamic economics based on Sharia. To achieve this, the authors developed a multi-stage standard and found that compliance ranges from 29% to 90%. Such indicators show a threat to the Islamic identity of some banks. The authors conclude that systematic verification of Islamic banks’ compliance with Sharia principles and current standards is necessary to ensure transparency of operations for clients.
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