Abstract
As custodians and trustees of public money, Islamic banking institutions (IBIs)
must have a good reputation that cannot be achieved without a strong legal and
corporate governance (CG) framework. The base for good governance inside
financial institutions including IBIs in any jurisdiction is provided by the legal
framework of the country, since the respective roles and responsibilities of
corporate governance players inside IBIs are derived from the established law. In
this study, the general legal and corporate governance framework for the banking
sector in Pakistan is discussed. It is found that unfortunately the Islamic banking
sector, which has great potential, is functioning without a proper legal cover
which is a challenge for good governance as well as transaction implementation
of IBIs, especially for the unilateral promises by the counterparties and hence for
their soundness in future. Therefore, proper law must be promulgated, wherein all
the respective roles and responsibilities of different CG players are declared
mandatory, followed by punitive consequences in instances of non-compliance by
them. Also, all the transactions should be given legal validation, which should
resolve the issue of breaching any of the different contracts by the counterparties,
especially their unilateral promises.
Dr. Mohammad Ayaz, Dr. Jibrail Bin Yusuf, Dr. Hassan Shakeel Shah. (2018) Legal and Corporate Governance Framework for Islamic Banks in Pakistan, Islamic Banking and Finance Review, Volume 5, Issue 1.
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