11.1 Regulation on Shari’ah Compliance for Financial Services

11.1.1 General Provisions for Inclusion

11.1.1.1 Where IFIs offer Islamic Financial Products and/or Services, the Board and Senior Management must monitor and ensure that they are fully compliant with Shari’ah principles and governance. Shari’ah governance rules are set out in separate Regulation issued by the Central Bank.

11.1.1.2 ISSC is responsible for the Shari’ah compliance and the fairness of the Financial Products and/or Services offered by IFIs in accordance with the Shari’ah Governance Standard for IFIs.

11.1.1.3 IFIs must establish an effective and fair distribution of profit between the IFIs (shareholders) and investment accountholders (profit distribution mechanisms) in accordance with the applicable, relevant standards. IFIs and their respective ISSC should have effective oversight over profit distribution.

11.1.1.4 IFIs must integrate Shari’ah compliance into their culture, processes, operations and code of conduct.

11.1.1.5 IFIs must establish effective and independent oversight to ensure Shari’ah compliance throughout the organization.

11.1.1.6 IFIs must educate Consumers on the differences between conventional and Islamic financial products as well as the principles and the contracts that their Financial Products and/or Services are based on.

11.1.1.7 IFIs must disclose to Consumers the legal consequences of the contracts used in the financing provided to the Consumer.

11.1.1.8 IFIs must disclose to Consumers the legal consequences of their choices.

11.1.1.9 IFIs must ensure that the Consumers are presented with adequate information in regards to the Financial Products and/or Services they offer, including Shari’ah Certificates and grant access to the internal Shari’ah functions in case the Consumers have doubts about the Shari’ah compliance of the Financial Products and/or Services.

11.1.1.10 ISSC must ensure that obligation to pay charity in case of a Consumer's default is not abused by the IFIs and the relevant departments.

11.1.1.11 ISSC must ensure that the obligation set out above is not exercised if the Consumer is insolvent or bankrupt (not Mumatil).

11.1.2 Early Settlement Fee

11.1.2.1 IFIs must adhere to the Early Settlement Fee requirements set by the Central Bank and disclose this fact to their Consumers.

11.1.2.2 In the event that the Central Bank mandates the IFI to waive a part of the outstanding debt in case of early settlement, the IFI must comply with the Permissible limits of debt/liability IFIs are allowed to retain prescribed by the Central Bank in accordance with the relevant HSA resolutions.

11.1.2.3 Licensed Financial Institutions must not impose Early Settlement Fees except in relation to the actual costs incurred by the Licensed Financial Institutions as a result of the early settlement process and in accordance with the HSA resolution on early settlement No. (76/3/2019), and these principles should be considered in the product disclosure statements while ascertaining transparency and truthfulness of the information.