Regulatory Alerts2011-01-13 | FPR/DIR/CIR/GEN/01/010 BGuidelines on Shariah Governance for Non-Interest Financial Institutions in Nigeria
This is a standard template for setting up a Shariah Advisory Committee (SAC) in accordance with the principles of Islamic finance. The template outlines the role and composition of an independent SAC, its relationship with the board of directors, its decision-making process, and various other aspects such as reporting and competence requirements. Key points include: 1. Composition of the Committee: The SAC must consist of at least three members. Ideally, one of them should be a scholar from a recognized Islamic jurisprudence (Ulema), another should have extensive knowledge in finance, accounting or economics and the third member could possess legal expertise. 2. Independence: The SAC must maintain its independence and objectivity at all times to ensure that it performs its oversight role effectively without any undue influence from the management of a NIFI. 3. Competence: Members of the SAC are expected to demonstrate competence, understanding, and expertise in both Islamic finance principles and conventional finance practices. The NIFI is encouraged to facilitate continuous professional development for the members of the SAC. 4. Confidentiality and Consistency: All sensitive and confidential information obtained by the SAC during their duties must be kept strictly confidential. The SAC is also expected to ensure consistency in its Shariah rulings, decisions, and resolutions through a structured process. 5. Internal Shariah Compliance Unit: Each NIFI is required to have an internal unit responsible for ensuring compliance with the Shariah guidelines issued by the SAC. This unit serves as the first point of reference for all Shariah-related issues within the institution and could also serve as the secretariat to the SAC. The above summary aims to provide a concise overview of the principles governing the establishment and functioning of an independent Shariah Advisory Committee in accordance with best practices and regulatory guidelines.