External Sharia audits gain traction in Islamic finance — study

External Sharia audits are gaining support in Islamic finance as consumers and regulators seek more transparency and accountability. Pressure for more external oversight has been building in several countries that have major Islamic finance industries, and this year Bahrain’s central bank proposed new governance rules that would require Islamic banks there to conduct external Sharia audits. The study, published by the Malaysia-based International Sharia Research Academy for Islamic Finance and Britain’s UK Islamic Finance Council (UKIFC), said external Sharia audits should become mandatory globally. Omar Shaikh, advisory board member of the UKIFC, said external Sharia audit would play an important role towards providing reassurance to scholars, financial institutions and customers. The study suggested that to help national regulators introduce external Sharia audits, the scope of the audits should be made clear, results should be publicly disclosed and there should be conflict resolution mechanisms.