Handbook on Corporate Governance in Financial Institutions
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Handbook on Corporate Governance in Financial Institutions

Edited by Christine A. Mallin

The global financial crisis has led to more and more focus on corporate governance and financial institutions. There has been much coverage in the media about various corporate governance related issues in banks and other financial institutions, such as executive directors’ remuneration and bankers’ bonuses, board composition and board diversity. This engaging book, dedicated to the corporate governance of banks and other financial institutions, makes a timely and accessible contribution to the literature in this area. The chapters highlight many of the shortcomings of corporate governance which have led to financial scandals, whilst indicating areas where corporate governance can be strengthened and improved.
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Chapter 11: Corporate governance in Islamic financial institutions: what have we learnt?

Hisham Farag


Given the recent developments and growth in the Islamic finance industry during the last decade, this chapter investigates the main corporate governance characteristics of Islamic financial institutions (IFIs). Corporate governance has attracted the attention of business communities around the world after the global financial crisis. However, governance in IFIs is unique, due to the complex principal_agent problems. Therefore, governance of IFIs has gained even more attention than conventional financial institutions as a result of the concept of risk-sharing born by investment account holders (IAHs). The chapter also highlights the main regulatory bodies governing IFIs in addition to the governance mechanisms in IFIs and the principles of Shari’ah governance. Finally, the chapter analyses the main findings of academic research on the fundamental differences between conventional financial institutions and IFIs, and the main challenges facing the development of the Islamic finance industry.

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