Sharia Supervisory Board Religious Compliance in the Islamic

Banks: An Interpretive Approach

Yuliana Sari

, Agnemas Yusoep Islami

and Isni Andriana

Polytechnic Sriwijaya, Palembang, Indonesia

Management and Science University, Shah Alam, Malaysia

Universitas Sriwijaya, Palembang, Indonesia

Keywords: Sharia Supervisory Board, religious compliance, Islamic banks, interpretive approach

Abstract: The concept of SSB religious compliance comes from a Sharia (Islamic teaching) law as foundation rules and

principles in the Islamic banks. The concept of SSB religious compliance is shaped by the role of religious,

normative and moral values. The objective of this paper is to explore how SSB articulates the notion of

religious compliance in the context of Sharia compliance process in the Islamic banks. This paper is a

conceptual based on previous researches to adopt in examining how SSB constructs the meaning of religious

compliance in Islamic banks. This paper is deemed to provide the richest from a literature review and analysis

using an interpretive approach to describe the meaning of SSB religious compliance in the Islamic banks.

This paper demonstrates that SSB constructs the meaning of religious compliance in appearance and in fact

through the social interactions at three levels: micro or personal self-reflexivity through ethical reasoning and

image of individual SSB; institutional or organizational culture through a range of business activities and

reputation; and macro or regulators and governance structure. This paper contributes to the Islamic banking

literature by providing understandings into the construction of the meaning of SSB religious compliance from

an interpretive approach.

1 INTRODUCTION

The concept of sharia supervisory board (SSB)

religious compliance develops out from a religious

imperative within Islamic banking and finance

industry (IBF) in keeping with the principles and

teaching of Islam. The religious imperative stresses

the preservation of ethically based credentials and

other exploitative and speculative based activities and

promotion of risk sharing, innovation,

entrepreneurship in the IBF business and operations

(Warde, 2010; Diwany, 2010; Archer & Karim,

2007). The religious compliance in the IBF is deeply

dependent on the views of SSB members. However,

most of the theological exegeses are based on

personal judgment, creating a risk of certifier bias

(Hayat, et al., 2013).

In a border research perspective, the concept of

SSB religious compliance is shaped by the role of

religious, normative and moral values. Some previous

research explores the compliance behavior related to

the notion of power, control in an institutional setting.

For example, three top-rank journals in accounting

and finance are Accounting Organizations & Society

(AOS), Journal of Business Ethics (JBE), and

Accounting Auditing & Accountability Journal

(AAAJ). Some researches review the concept of

compliance, for example, Denyer (2009) and Dixon-

Woods, et al. (2006) discuss the different

perspectives of compliance within complex

organizational systems and its environments.

Further, Sutinen & Kuperan (1999) also study the

intrinsic and extrinsic motivation of compliance

behavior, such as detention of enforcement system,

illegal gains and its related sanctions, social influence

and legitimacy objectives, and internal and external

moral development and personal values. In

determining compliance, the form of pure and social

power or normative power is more useful and also can

represent through ritual, symbol, esteem, and prestige

(Etzioni, 1961). Weber, et al. (1946) put forward that

the concept of compliance base on the conformity to

legitimate order, charismatic devotion, and

obedience. Weber’s form came from the personal

religious need and the perceived ideal interest within

the social order. Parsons (1968) provided that the

Sari, Y., Yusoep Islami, A. and Andriana, I.

Sharia Supervisory Board Religious Compliance in the Islamic Banks: An Interpretive Approach.

DOI: 10.5220/0008443806690676

In Proceedings of the 4th Sriwijaya Economics, Accounting, and Business Conference (SEABC 2018), pages 669-676

ISBN: 978-989-758-387-2

669

concept of compliance includes common sentiments,

a model of action or social relationship and the

integrity of the value pattern.

Despite the growth in the religious compliance

literature on the context of SSB, there has been little

effort to understand how the “meaning” of SSB

religious compliance in the Islamic banks. SSB

religious compliance is constructed in a context of

Islamic banks that has its roots for the assurance of

religious compliance for the Sharia compliance

process. Rahman (2011) exposed that SSB religious

compliance has brought a more focus on the need for

religious compliance to strengthen Islamic bank’s

credibility. Nevertheless, Shafii, et al. (2013) and

Yahya & Mahzan (2012) noted that religious

compliance also could be understood from a legal

insight. This reviews focused on the

underperformance of formal monitoring of religious

compliance.

Some critics in the early development stage of the

religious compliance practices in Islamic banks, such

as Hayat, et al. (2013) and Pitluck (2012) make a

comparison of Islamic finance in the different form of

investment alternative. They concerned Islamic banks

practices as ambiguous in much of the translation of

the Sharia law as the divine law. It described the

conflict with societal expectations of Islamic banks

ethicality and philanthropic motivation. Maurer

(2003) described the powerful and emotionally

unsettling in the negotiate and compromise ability in

the Islamic banks between alternative religious and

dominant values in a strange blend of a capitalist and

moral economy.

Therefore, this paper attempt to address the gap in

the literature by investigating how the meaning of

SSB religious compliance is constructed in the

context of Sharia compliance in Islamic banks using

the interpretative approach. This paper explores how

SSB articulates the notion of religious compliance in

the context of Sharia compliance process in the

Islamic banks.

Since this paper are concerned with an

understanding and explain the social world primarily

from the point of view of the actors directly involved

in the social process (Burrel & Morgan, 1979). Using

an interpretive approach to study the phenomenon, as

it offers the prospect of reflecting some of the

complexity and richness of Sharia compliance

process in the Islamic banks within which religious

compliance is being practised.

The remainder of the paper is organized as

follows. Next section, this paper explains the

theoretical framework SSB religious compliance and

Sharia compliance process in the Islamic banks. The

following section describes the methodology,

followed by discussion. The last section presents the

conclusions

2 THEORETICAL FRAMEWORK

The Sharia supervisory board (SSB) is part of the

key organ on Sharia governance to comply with the

Sharia rules and law in the Islamic banks. Nathan &

Ribiere (2007) exposed that the existence of the SSB

is very crucial to ensure the integrity and credibility

of Islamic banks. SSB is the independent body, which

has a responsibility to direct, review and supervise all

the banking activities and products to comply with the

Sharia rules and principles. Although SSB is a vital

resource in Islamic banks, SSB is derived from

different resources of the board of director (BoD).

Choudhury & Hoque (2005) and Daoud (1996)

explained that SSB authorities base on religious, legal

and systematic resources. The main obligation of SSB

is to ensure that Islamic bank conducts their business

activities in compliance with Sharia rules and

principles (Algaoud & Lewis, 1997).

SSB as individuals, groups, and sub-groups

through their interaction in the Sharia compliance

process, construct meanings based on their

understanding, experience and interpretation of their

surroundings and actions at every level in the Sharia

compliance process. Therefore, an interpretative

approach provides a framework to investigate how

the meaning of SSB religious compliance is formed

in the Islamic banks and its implications on the Sharia

compliance process.

Interpretative or natural approaches mainly focus

on people’s perceptions of reality and individual

meanings (Hopper and Powell, 1985). The overall

objective of the interpretive approach can be

classified with meaning and understanding from the

result of processes of interpreting. For example, the

grasping and comprehending of the meaning that is

felt, intended, and/or expressed by actors (Denzin,

2001).

An interpretive approach focuses on the details

and processes from actors’ interpretation of the

meaning of their own and others actions (Schwandt,

2000). Most of the interpretive researchers combine

around the effort to explicate the ways people in

specific social settings come to understand, account

for, and manage their daily life to build

understandings. Therefore, there are three main

central concepts in an interpretive approach,

interpretation, meaning, and understanding (Denzin,

2001).

SEABC 2018 - 4th Sriwijaya Economics, Accounting, and Business Conference

670

The purpose of an interpretive approach is not

always to find one truth. It gave the social

construction from reality that might be many truths to

construct (Shotter, 1993). Every understanding has

negotiated meanings, and, as such, it is open to

reconstruction (Schwandt, 2000). Therefore, Blumer

(1969) proposed the three concepts in an interpretive

approach, including social interactions, joint action

and differential degree of power. Social interactions

can be defined as learning conditions to fit with others

who share the same world interpret as a collective

voice or by adjusting one’s manner to fit with

accepted norms. For example, SSB often has their

own pre-conceived judgments concerning the Sharia

compliance process in the Islamic banks. When SSB

encounters a new situation or rule, SSB must redefine

their opinion based on interactions with others, such

as BoD, Sharia compliance officers, internal auditors,

etc.

Furthermore, Blumer (1969) explained that joint

action relates to the collective manner of diverse

participation in the negotiation process when a new

situation arises. For instance, among SSB members

experience the negotiation process, can take joint

action to accept or reject new rules or recommended

practices. The differential degree of power also forms

the meaning within the structure and organizations

held by various actors. It may not only influence but

also change the meanings of the phenomenon. For

example, the change in meanings and actions

attributes the higher level of negotiation powers held

by some actors relative to others in the negotiation

process, e.g. authority, intellect, etc.

The concept of compliance shapes from the role

of religious, normative and moral values (Smith,

1790). Drawing from the previous studies, this paper

adopts the notion of SSB religious compliance to be

articulated within the set of characteristics that reflect

a particular social reality. At the macro level or

regulatory level, factors such as ideational realm of

cultures such as general values and norms,

philosophy, religious beliefs, and ethical principles,

would set the limitations within which actors

cooperate and develop their actions. Within an

institutional or at the meso level, the interaction

between SSB members and the bank’s management

may be influenced by the organizational culture. At

the micro level or personal, self –reflexivity will

support individuals to interpret the meanings and to

see themselves from the perspectives of others.

3 METHODOLOGY

This paper is conceptual in nature. Based on

previous researches to adopt in examining how SSB

constructs the meaning of religious compliance in

Islamic banks. This study explores how SSB

articulates the notion of religious compliance in the

context of Sharia compliance process in the Islamic

banks based on an interpretive approach. The

discussion and conclusions of this paper as a concept

for describing the meaning of SSB religious

compliance in the Islamic banks using an interpretive

approach.

Thus, the methodologically, this paper is deemed

to provide the richest from a literature review and

analysis. A theoretical and extensively study of

literature to bring out the objective of presenting the

SSB religious compliance observes to the following

principles:

 Study behaviour, the range and variety of

meanings of religious compliance, and

 The actor’s definition of the situation of reality

and their relation to behaviour need.

4 DISCUSSION

Macro or regulatory constructs of SSB religious

compliance

The Islamic bank develops from a religious

imperative to provide alternative financial services in

keeping with the principles and teaching of Islam.

Diwany (2010) and Archer & Karim (2007)

suggested that the religious imperative demands are

to preserve of ethically based credentials, which

include the bank on Usury (interest) and other

exploitative and speculative based activities and

promotion of risk sharing, innovation,

entrepreneurship.

Further, the Islamic bank’s compliance is heavily

reliant on the views of Sharia boards (Sharia

supervisory boards/SSB). However, most of the

theological exegeses are based on personal judgment,

creating a risk certifier bias (Hayat, et al., 2013;

Dranove & Jin, 2010). As an in-house Sharia board of

the Islamic banks, their decision will have to refer to

the national Sharia institution, and at the same time,

certain prominent individual Sharia board members

might have a powerful impact on higher level Sharia

rulings (Fatwa). Their decision of interpretation from

Islamic law as a source of guidance for Islamic banks,

for example, is a strategy for responding to existential

uncertainty (Clack, 2008).

Sharia Supervisory Board Religious Compliance in the Islamic Banks: An Interpretive Approach

671

Government and regulatory bodies have

committed to developing formal regulations for an

Islamic bank. A number of governances’ standard and

guidelines are issued on the international level, i.e.,

the Accounting and Auditing Organizations of

Islamic Financial Institutions (AAOIFI) and the

Islamic Financial Services Board (IFSB). Several

central banks, such as Bank Negara Malaysia (BNM),

Bank Indonesia (BI), Central Bank of Bahrain (CBB),

and State Bank of Pakistan (SBP), have also

published governance guidelines for Islamic banks to

raise the confidence of the users of financial

statements in the information covered in them.

In regards to the Islamic bank industry as the

social phenomenon, there are some issues in Islamic

banks that relate the picture of religious compliance.

Islamic banks as the fairly new and unfamiliar

industry for regulators have been operating in a

weaker government oversight and non-transparent

environment. For example, the collapse of Ihlas

Finance House (IFH) of Turkey in 2001 showed

about the weaknesses of corporate governance in

practice. It describes that a failure for the

implementation of religious compliance, which

entails negative repercussion for trustworthiness and

sustainability of an Islamic financial institution

(Sultan, 2007; Jang, 2003).

Thus, most of the regulators arrange their

governance structure by the addition of SSB to

distinguish from conventional governance structures.

The addition of SSB in the governance structure is

required to encourage transparency and disclosure in

decision-making and religious compliance in Islamic

banks. The regulator adds SSB as an in-house

religious advisor to ensure that Islamic bank’s

business practices and products comply with Islamic

law, and also to mitigate the institution’s exposure to

fiduciary and reputational risk related to religious

compliance in Islamic law (Algaoud & Lewis, 1999).

Linking back to Islamic banks, Sharia rules and

principles are intended to stabilize the structure of

compliance behavior. However, regulators have left

religious compliance under the Islamic bank as

institutional for many reasons. As the result, the level

of enforcement of religious compliance in Islamic

banks is endogenous. In a sense, Islamic banks

reflexivity in religious compliance behavior lies

within a continuum of an expected cost linked to

institutional legitimacy and pressures, and the extent

of the accepted level of non-compliance. Gidden

(1986) emphasized that human action occurs as

continues the flow of conduct, as does cognition. So,

the religious compliance in Islamic banks is

composed of an aggregate of their actors and

institutional, reasons and motives.

In short, regulators set Sharia rules and principles,

which based on the Quran and Sunnah (an illustration

of the lifestyle, daily religious practices, acts and

behaviors of the Prophet Muhammad) as religious

compliance in the Islamic banks. Sharia rules and

principles provide a set of rights and obligations that

enable Islamic banks to gain credibility and integrity

as an ethical and religious compliance based financial

services provider (Diwany, et al., 2010).

The main sources for Islamic bank as religious

compliance codes are the Quran and Sunnah. The

Quran and Sunnah as the main guidance in Islam

divided three foundations for the religious

compliance codes, namely Aqidah (the code of faith),

Sharia (the code of practice), and Akhlaq (the code of

ethics). Aqidah defines the principles of faith and

belief in Islam. Akhlaq governs the Islamic ethical

and moral code at a personal level. Further, Sharia

treats as a being synonymous with the law and

governs all forms of practical action, such as ethics

and the religious compliance approach to faith are

directly connected. It involves both the law that

governs man’s worship of God, which pertains to

Ibadah (devotional matters) and the law that relates

to man’s acts in terms of political, economic and

social domains of behavior (Mu’amalat). Sharia is

considered enforceable in both these areas (Diwany,

et al., 2010).

As a result, the regulators have left religious

compliance under the Islamic bank as institutional for

many reasons. However, regulators construct the

religious compliance base on the Quran and Sunnah.

Through the Quran and Sunnah as the elements in the

macro environment is making it easier to take joint

actions to bring about changes, SSB construct their

meanings of religious compliance accordingly. Then,

interactions also occur at the institutional level

between SSB, and this affects their construction of the

meaning of religious compliance, as discussed next.

Meso or institutional constructs of SSB religious

compliance

The ambiguities in Islamic banks are evident and

unresolved even at the regulatory level, have

subsequently drifted down into the institutional level.

The unresolved ambiguity combined with the low

exogenous pressure could create a grey area. It leaves

some rooms between the rules and Islamic banks as

institutional understanding and interpretation, and a

gap to construct the meaning of SSB religious

compliance, which has drifted down into institutional

levels.

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672

In the governance structure in Islamic banks,

regulators require banks to employ a Sharia

Compliance Officer (SCO) as an independent,

extended structure of the SSB. Some critics from

scholarly works highlighted that the Islamic banks

heavy dependent on the views of SSB as in-house

Sharia scholars in the seal of approval of compliance

(Hayat, et al., 2013; Dranove & Jin, 2010). In the

course of interpretation of the theological exegeses

are based on personal judgment and could lead a risk

of certifier bias (Unal, 2011, Rammal &Parker,

2010).

In regards to the construction of the meaning for

SSB religious compliance as the social phenomenon

of this paper, there are issues in Islamic banks, which

provide a picture of religious compliance. The SSB

activities are the key to corporate governance in

Islamic banks to ensure the constant surveillance and

check-and-balance over the Islamic bank’s products

and operations (Al Nashmi, 2002). Hasan (2008) and

Rahim (2008) stated that the roles and functions in

Islamic banks are directing, reviewing and

supervising all activities, products, and services of the

Islamic banks to ensure they are in compliance with

Sharia law.

Sharia law as a base of religious compliance in

Islamic banks has the ultimate objective to bring

about human prosperity. Linking back to Islamic

banks as a financial institution based on the Sharia

law, hence advancing society’s well-being,

eventually becomes part of the organizational

objective. In this case, the SSB religious compliance

from the institutional perspective is merely a tool for

checking the fulfilment of Sharia legal requirements

(Muneeza & Hassan, 2013).

SSB religious compliance can be an assurance

program, if properly in place, and becomes a

compliance defiance system. SSB religious

compliance brings about the reference to a

restructuring program to stabilize the dynamic of

religious compliance attitude, which in the end guides

the Islamic banks to comply with Sharia law.

However, some criticisms for Islamic banks showed

that the doubts in the interpretation of religious

compliance principles, and a lack of monitoring of

Sharia compliance (Rahman, 2011; Kasim, et al.,

2009).

The focus on SSB is controlled demands and

expectations to ensure religious compliance are being

met in Islamic banks environment. But a lack of

consensus on Sharia compliance criteria in this

industry is trapped within the battle of defining

religious compliance parameter. Islamic banks as

financial institutions have been trapped into legally

based religious compliance whilst seeking to build

moral commitment to the Sharia principles and rules

with the religious compliance law. This is represented

through the differences of interpretation of Sharia as

religious compliance in different jurisdiction and

Islamic banks as financial institutions (Hameed,

2009; Aggarwal & Yousef, 2000).

In other words, the meaning of SSB religious

compliance in Islamic banks is flourishing with the

academic work to the industry focus on legitimating

legal compliance to the religious order (Yahya &

Mahzan, 2012; Muhamad, Edil bin Abd. Sukor, &

Shihabuddin, 2009). Islamic banks as a financial

institution with the Sharia law become alerted to

legitimating the ethical aspect and morality in their

operations and products since an ethical lapse could

damage organizational reputation. Power (1999) put

an argument that the rise of religious compliance has

roots in political demands for accountability and

control, and the assurance of religious compliance

becomes subject to formal scrutiny.

Although the meaning of SSB religious

compliance in appearance is associated with the

interpretation of Sharia law within Islamic banks as

financial institutions, SSB also needs to interpret their

actions based on their personal values, and this is

discussed next.

Micro or actors constructs of SSB religious

compliance

Self-reflexivity becomes an important variable in

enabling individuals, through their social interactions

to build a perspective or opinion of a particular

concept (Hudaib & Haniffa, 2009). Alford &

Friedland (1985) emphasized that individual behavior

can never be adequately explained by individual

interest, perceptions, and motivations, nor can

individual behavior or social interaction theories

explain organizational or societal processes.

In the case of Islamic banks, they face two highly

institutionalized environments, the regulatory

environment with its own authoritative, and the

endogenous religious rules and governance

environment that need to be satisfied to be qualified

as a Sharia-compliant financial institution. SSB as the

in-house scholars have a crucial role to assure the

Sharia law as the values basis in the Islamic bank’s

products and operation. SSB is an independent body

in Islamic bank’s governance structure, which

designs to perform religious compliance law

translation and interpretation. SSB also have a

responsibility to assure the implementation of

religious compliance principles in the Islamic bank’s

products and operation (Kasim, et al., 2009).

Sharia Supervisory Board Religious Compliance in the Islamic Banks: An Interpretive Approach

673

SSB certifies the Sharia-compliant aspect for

every product, transactions, and agreements of the

Islamic bank by issuing a Sharia legal opinion called

Fatwa. The role and function of SSB as the in-house

religious scholar is central to internalization of Sharia

compliance principles for the overall aspects of the

Islamic bank’s products and operations. SSB has a

crucial responsibility to assure the implementation of

the pronounces Sharia rules and principles for

religious compliance and SSB must be separated with

the Sharia compliance officer as an internal religious

compliance to review all banking activities in day-to-

day operation (Besar, et al., 2009).

In the Sharia compliance process, SSB is

described as a traditional controller in order to

develop credible images that rationalize what they are

doing. SSB tacit knowledge plays an important role

in every decision on Sharia compliance approval for

each product and operation in Islamic banks. In this

case, the construction of SSB religious compliance

comes from their tacit knowledge and power as the

individual religious scholar controls and balances the

ambiguous religious rules to meet the business

demand.

Further, there is a heavy reliance on the tacit

knowledge of SSB as the individual scholar to

perform the meaning of religious compliance and also

as the rules maker, the rules-fine runes, the rules

refine and the rules auditor. At the individual level,

SSB has an ambiguity to interpret the religious

compliance, when a single individual handles the

Sharia governance main functions. So, the

construction of SSB religious compliance is very

much related to personal style, power, personal

religious views, and independency (Archer & Karim,

2007).

The above rhetoric shows that a gap between

Sharia rules and implementation might create rules

ambiguity in relation with the SSB religious

compliance, and this becomes wider when the rules

maker is also the rules auditor. The issue is the lack

of direction of religious compliance principles makes

inconsistency and the absence of operational

principles enables actors and institutions to exploit

the inherent openness of rules interpretation, and

shape the religious compliance according to their

preferred direction (Al Nashmi, 2002).

SSB religious compliance behavior describes a

dynamic process reflecting the trade-off between two

poles of Sharia law and business logic and the

rationalization of power and resource allocation

(Daoud, 1996). From the Islamic perspective, Sharia

as a law is considered enforceable for devotional or

Ibadah (ritual matters), and in any political, social,

economic and commercial activities (Mu’amalat)

(Hameed, 2009).

In SSB assurance program, a religious compliance

defense system brings a reference to a rectification

program to stabilize the dynamic of religious

compliance attitude, which in the end guides Islamic

banks to be congruent with its ideals.

5 CONCLUSIONS

This paper provides understandings and

interpretations of the meaning of SSB religious

compliance in the context of Islamic banks. The

constructions and interpretations are drawn from the

richest from a literature review and analysis.

The contextual analysis in this paper at the macro

level or regulator level indicates the meanings of the

concept of SSB religious compliance to a large extent

are being associated with Sharia rules and principles,

which based on the Quran and Sunnah. Government

and regulatory bodies have committed to developing

formal regulations for an Islamic bank. On an

international level, a number of governances’

standard and guidelines are issued, such as the

Accounting and Auditing Organizations of Islamic

Financial Institutions (AAOIFI) and the Islamic

Financial Services Board (IFSB).

Sharia rules and principles are intended to

stabilize the structure of compliance behavior.

However, regulators have left religious compliance

under the Islamic bank as institutional for many

reasons. As the result, the level of enforcement of

religious compliance in Islamic banks is endogenous.

As a result, the SSB religious compliance in Islamic

banks is constructed of an aggregate of their actors

and institutional, reasons and motives.

Similarly, lack of meaning of SSB religious

compliance might lead frustrating for some SSB. In

the same vein, lack of religious compliance means

that SSB needs to deal with pressures of bias and

discrimination in maintaining SSB religious

compliance. The business and economic objectives

by Islamic banks could force the meaning of SSB

religious compliance to the disturbance and might

lead to the image of Sharia compliance process within

Islamic banks.

At the meso or institutional level, the Sharia law

largely influences the meaning of SSB religious

compliance as the mandatory regulations and rules in

the Islamic banks. Linking back to Islamic banks as a

financial institution based on the Sharia law, hence

advancing society’s wellbeing, eventually becomes

part of the organizational purpose. SSB religious

SEABC 2018 - 4th Sriwijaya Economics, Accounting, and Business Conference

674

compliance can be an assurance program, if properly

in place, and becomes a compliance defiance system.

SSB religious compliance brings about the reference

to a restructuring program to stabilize the dynamic of

religious compliance attitude, which in the end guides

the Islamic banks to comply with Sharia law.

Further, the meaning of SSB religious compliance

in Islamic banks is flourishing with the academic

work to the industry focus on legitimating legal

compliance to the religious order (Najeeb & Ibrahim,

2013; Yahya & Mahzan, 2012). The Sharia law

becomes alerted to legitimating the ethical aspect and

morality in the Islamic bank's operations and products

since an ethical lapse could damage organizational

reputation.

At the micro level, the SSB religious compliance

is often related to the personal reputation and

understanding of the local environment and religious

norms rather than the organizations and general

ethics. Understanding the nature of SSB as a symbol

in the Islamic banks, it can help to understand the

concept of SSB religious compliance and the need for

adaptation of such concept to be in line with Sharia

law.

From the various interpretation of the

construction of the meanings of SSB religious

compliance in Islamic banks, it can be determined

that SSB as a personal actor has a crucial role to

assure the Sharia law as the values basis in the Islamic

bank’s products and operation. SSB is an independent

body in Islamic bank’s governance structure, which

designs to perform religious compliance law

translation and interpretation.

SSB is described as a traditional controller in

order to develop credible images that rationalize what

they are doing. SSB own a tacit knowledge to manage

every decision on Sharia compliance approval for

each product and operation in Islamic banks. In

Islamic banks, the construction of SSB religious

compliance comes from their tacit knowledge and

power as the individual religious scholar controls and

balances the ambiguous religious rules to meet the

business demand. The concern for constructing the

meaning of SSB religious compliance comes from the

adoption of Sharia law values, expression, a reflection

of societal needs, competent judgments, and an

independent and influential from the professional

body.

The limitation of this paper is this paper only

focuses on understanding the construction of the

meanings of SSB religious compliance base on

interactions at macro, institutional and personal level.

This paper does not distinguish how different social,

cultural, firm and personal factors, which can

influence the perceptions on the SSB religious

compliance when faced with specific situations of

conflict. As a result, it would be interesting for future

study to explore this aspect.

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