How has Education in the Middle East and North Africa evolved to keep up with progressive digital and regulatory requirements of the times?
From the rise of AI in the classroom to the strong international interest in the regions education market the sector continues to undergo major transformation.
Our latest Law Update
, titled “Brushstrokes of Law: Painting the Future”, takes a deep dive into these latest developments. In this issue, we explore:
We also feature a special section on our collaboration with the Mawaheb Art Studio, a unique creative space for People of Determination, and the artwork you see through the pages of this edition is a reflection of the students creativity.
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A strong and a well-functioning financial system is crucial to any economy. It is therefore imperative to ensure that financial institutions, which play a core role in the economic stability and development of a country, are secure and stable. This can only be achieved through effective internal and external regulation. To this end, the notion of ‘Corporate Governance’ becomes very important from the perspective of internal regulation.
To put it simply, ‘Corporate Governance’ is the way an entity polices itself. It comprises a set of internal rules, policies and procedures defining the functions, roles and responsibilities of various stakeholders within an entity, such as the board of directors and the senior management.
Last year the Central Bank of the UAE (‘Central Bank’) issued the Corporate Governance Regulations together with the Corporate Governance Standards (together the ‘Regulations’) which are applicable to all banks licensed by the Central Bank. Our previous article on the Regulations can be found here. The Regulations briefly cover corporate governance requirements for banks offering Islamic financial services in Article 14 thereof.
The Central Bank issued the Shari’ah Governance Standards for Islamic Financial Institutions (the ‘Standards’) on 3 May 2020 (‘Effective Date’).
The Standards, which are effective from the Effective Date, outline the mandatory minimum requirements applicable to the following financial institutions in respect of their corporate governance framework and practices:
It should be noted that the Central Bank and the Higher Shari’ah Authority at the Central Bank (‘HSA’) previously issued various regulations, standards, circulars, notices and resolutions which deal with some aspects of corporate governance. The Standards make it clear that they should be read in conjunction with the earlier issued regulations, standards, circulars, notices and resolutions of the Central Bank and the HSA.
As per the Standards, Islamic Financial Institutions are required to set a Shari’ah governance framework (‘IFI Governance Framework’):
within 180 days from the Effective Date and to submit it the Central Bank for approval. All Financial Institutions must fully comply with the requirements of the Standards within one year from the Effective Date.
The Standards comprehensively provide the roles and responsibilities of the Board of Directors of the Islamic Financial Institution (‘Board’), senior management and certain committees and departments of an Islamic Financial Institution. Briefly listed below are their main responsibilities.
Ultimate responsibility for ensuring that a comprehensive IFI Governance Framework is put in place and that the Islamic Financial Institution is in compliance with the IFI Governance Framework and Islamic Shari’ah (i.e. resolutions, fatwas, regulations and standards issued by HSA and resolutions and fatwas issued by the Islamic Financial Institution’s Internal Shari’ah Supervisory Committee (’ISSC’), in relation to licensed activities and businesses of the Islamic Financial Institution) rests with the Board.
The Board is required to hold at least one meeting with the ISSC each financial year to discuss issues pertaining to Shari’ah compliance.
The Board’s Risk Committee is generally responsible for supervising and monitoring the management of Shari’ah non-compliance risk, setting controls in relation to each type of risk and overseeing the implementation of the Shari’ah non-compliance risk framework;
The Board’s Audit Committee is generally responsible for evaluating the effectiveness of the policies approved by ISSC, assessing the effectiveness and adequacy of internal and external Shari’ah audit and reviewing and checking compliance with reports prepared by the Internal Shari’ah Audit Division/Section and external Shari’ah auditors.
The senior management is generally responsible for executing and managing the Islamic Financial Institution’s activities and business in compliance with Islamic Shari’ah.
Internal Shari’ah Control Division/Section supports the ISSC in its duties. The Internal Shari’ah Control Division/Section, however cannot issue fatwas or resolutions.
The Internal Shari’ah Control Division/Section is required to carry out the following functions:
The Internal Shari’ah Audit Division/Section is generally responsible for undertaking Shari’ah audits and monitoring the Islamic Financial Institution’s compliance with Islamic Shari’ah.
The Internal Shari’ah Audit Division/Section is required to submit reports to the ISSC and to the Board Audit Committee at least bi-annually.
The issuance of the Standards is a welcome development as it provides a comprehensive corporate governance framework for Islamic Financial Institutions that was lacking in the Regulations. All Islamic Financial Institutions are encouraged to undertake a full review of their existing internal policies and procedures and develop an IFI Governance Framework in accordance with the Standards.