Open AccessU-8 The Concept, Need and Significance of Sharia rating in Islamic Financial institutions in the perspective of Credit Rating Agencies
Author(s) -
Muhammad Mushtaq Ahmed,
Javed Khan
Publication year - 2021
Publication title -
al-iʿjāz taḥqīqī majallah barāʾe islāmiyyāt va insāniyyāt
Language(s) - English
Resource type - Journals
eISSN - 2707-1219
pISSN - 2707-1200
DOI - 10.53575/u8.v5.01(21).111-129
Subject(s) - sharia , islam , financial institution , business , accounting , financial services , credit rating , institution , finance , law , political science , philosophy , theology
Sharia compliance is considered the basic component of Islamic financial industry as sharia permissibility is one of the basic motive for majority of the customers of Islamic Financial services. Presently the assurance regarding the sharia compliance of Islamic financial institution is given by the Sharia Advisor or Sharia board of respective Islamic financial institution. But there is no process, similar to the credit rating agencies, which provides the public an independent assessment of the commitment of different Islamic financial institution as regard to follow sharia injunctions in true letter and spirit for comparison with other Islamic financial institution.
In this paper, the concept of credit rating, its origin, importance and advantages are discussed. In the light of the credit rating agencies practices, the concept of sharia rating and its importance are elaborated. It is observed and recommended that sharia quality rating will be very beneficial for all the stakeholders of the Islamic financial institutions as well the Islamic financial industry hence regulatory bodies of Islamic financial institutions, IFI’s and Credit Rating Agencies shall work together to further refine the concept for implementation of Sharia rating in the industry.