THE ROLE OF SHARIA BOARDS IN APPROVING AND MONITORING ISLAMIC BANKING SERVICES: A LEGAL ANALYSIS

Аннотация

This paper presents a detailed legal and comparative analysis of the functions, challenges, and regulatory models of Sharia boards in Islamic banking services. Drawing on global best practices, authoritative legal sources, and scholarly opinions from respected Sunni jurists, this study highlights the pivotal role of Sharia governance in ensuring the ethical and legal compliance of Islamic financial institutions (IFIs). It also evaluates the prospects of implementing Sharia boards in Uzbekistan, given the regional and international experience, and offers recommendations for a sustainable legal framework. Keywords: Sharia boards, Islamic banking, Sharia governance, AAOIFI, IFSB, Islamic finance, legal analysis, fatwa, comparative law. 1. Introduction Islamic banking, guided by the principles of Sharia, has emerged as a critical alternative to conventional financial systems, especially in Muslim-majority regions. Unlike conventional banks, Islamic banks must comply with jurisprudential principles rooted in the Qur’an and Sunnah. This necessitates the establishment of Sharia supervisory boards (SSBs) to oversee compliance. The increasing complexity of Islamic finance products has further amplified the role of SSBs in maintaining the ethical backbone of the industry [1]. 2. Methodology This study follows the IMRaD structure and utilizes a qualitative, doctrinal approach. Data was collected from primary sources such as legal texts, AAOIFI and IFSB standards, and state-issued regulations, alongside secondary sources like peer-reviewed articles and books from scholars including Shaykh Wahbah al-Zuhayli, Shaykh Ali Qaradaghi, Mufti Muhammad Taqi Usmani, and others. Comparative case studies from countries like Malaysia, UAE, Pakistan, UK, and Central Asia enrich the analysis. 3. Results 3.1. The Legal and Jurisprudential Basis for Sharia Boards Sharia boards derive their legitimacy from the need for Sharia compliance. AAOIFI’s GSIFI 1 and IFSB guidelines underscore the need for structured governance and independent scholarly oversight. Shaykh Wahbah al-Zuhayli emphasized in his writings that financial transactions require clear, qualified oversight due to the 59 THEORETICAL ASPECTS IN THE FORMATION OF PEDAGOGICAL SCIENCES International scientific-online conference sensitive nature of halal and haram in finance [2]. Qaradaghi also maintains that the legitimacy of Islamic banks hinges on the credibility of their Sharia boards [3]. 3.2. Functional Responsibilities of Sharia Boards Ex-ante Approval: Each new product or contract is reviewed and approved by the SSB. Ongoing Monitoring: Internal and external Sharia audits are conducted regularly. Fatwa Development: Legal opinions guide policy and operational practices. Dispute Resolution: Boards often mediate or issue rulings in compliance issues. 3.3. Comparative International Practice Malaysia: Dual-layer governance includes a central Sharia Advisory Council and institutional SSBs. Legally binding fatwas reduce fragmentation. United Kingdom: The Financial Conduct Authority (FCA) allows decentralized Sharia compliance but requires transparency and disclosure. Scholars like Nizam Yakubi have contributed significantly to refining this model [4]. Pakistan: A centralized Sharia board under the State Bank ensures uniform fatwa issuance and enforces compliance through Sharia audits [5]. Turkey and Indonesia: Government-backed Islamic banks and legal recognition of Sharia boards have facilitated broader acceptance. GCC (e.g., UAE, Oman): SSBs are integrated within central banks; dual governance ensures market flexibility while maintaining credibility. Central Asia: Kazakhstan and Kyrgyzstan have adopted AAOIFI standards. Tajikistan has begun legislative reforms, but expert shortages persist [6]. 3.4. Challenges in Sharia Board Governance Fragmented Fatwa Authority: Diverse interpretations create legal uncertainty. Scholar Shortages: There is a global deficit of scholars trained in both Sharia and modern finance. Conflict of Interest: Scholars sometimes serve multiple banks, raising independence issues. Legal Ambiguity: Many jurisdictions lack codified legal recognition of SSB authority. 4. Discussion 60 THEORETICAL ASPECTS IN THE FORMATION OF PEDAGOGICAL SCIENCES International scientific-online conference 4.1 Opinions from Prominent Scholars Mufti Muhammad Taqi Usmani asserts that without proper Sharia governance, Islamic banks risk becoming “Islamic in name only.” Shaykh Ali Qaradaghi argues for centralized Sharia boards to avoid inconsistency. Shaykh Wahbah al-Zuhayli supported codified legal frameworks for Islamic financial operations to maintain public trust [7][8]. Dr. Abdus Sattar Abu Ghuddah emphasized the importance of Sharia audits and independent reviews to maintain integrity. 4.2 Uzbekistan’s Context and Legal Potential Uzbekistan's legal system currently lacks explicit provisions for Sharia-compliant banking. However, the 2020 Presidential Decree on financial inclusio