Corporate governance in Islamic financial institutions has the same structure as a conventional institution but with an additional layer of Shariah governance. Shariah compliance is a “Raison d’etre” for an Islamic financial institution as well as the legitimacy and justification to the claim of being Islamic, made by the financial institution. With this background, exposure of an Islamic financial institution to Shariah non-compliance risk in case of non-observance of Shariah governance potentially results in reputational damage, loss of profit and the erosion of shareholder value.

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