The higher Shari’a authority: The industry’s ultimate referee

As the Islamic banking industry expanded across the world, one challenge became increasingly apparent: different Islamic scholars occasionally reached different conclusions on the same financial product. While such diversity of opinion has always been part of Islamic jurisprudence, it created practical difficulties for modern banking. A financing structure approved by one bank might be questioned by another, creating uncertainty for customers, regulators, and investors.

The United Arab Emirates addressed this challenge by establishing one of the world’s most sophisticated systems of centralized Shari’a governance. At the heart of this framework sits the Higher Shari’a Authority (HSA), an independent body operating under the Central Bank of the UAE. Far from replacing the Shari’a boards within individual banks, the HSA provides strategic direction, promotes consistency, and strengthens confidence in the Islamic financial system as a whole.

Every Islamic bank maintains its own Internal Shari’a Supervisory Committee (ISSC), whose members review products, approve contractual structures, and oversee the institution’s day-to-day compliance. However, without a central authority, differing interpretations could lead to fragmentation across the industry. The HSA serves as the national reference point, helping to ensure that fundamental principles are applied consistently.

The HSA’s responsibilities extend well beyond issuing fatwas. UAE legislation assigns it a broad regulatory role that reflects the growing maturity of Islamic finance. Among its key responsibilities are advising the Central Bank on regulations affecting Islamic financial institutions, approving Shari’a governance frameworks, issuing resolutions that are binding on ISSCs, and providing opinions on sovereign Sukuk and other Shari’a-compliant financial initiatives. It also contributes to the development of monetary and fiscal instruments that comply with Islamic principles, ensuring that public policy evolves alongside the industry’s needs.

One of the HSA’s most significant contributions has been the standardization of governance. Historically, Islamic finance often relied on institution-specific practices, with each bank developing its own approach to compliance. While this encouraged innovation, it also introduced inconsistency. By establishing common governance standards and issuing authoritative guidance, the HSA has helped create a more predictable operating environment.

The HSA also plays an important role in strengthening accountability. Its resolutions are binding upon the ISSCs of Islamic financial institutions, creating a clear hierarchy within the governance framework. This reduces the likelihood of conflicting rulings while ensuring that institutions remain aligned with national regulatory objectives. The legislation also empowers the HSA to conduct special examinations where necessary.

The HSA illustrates how Islamic finance has evolved from a system based primarily on individual scholarly opinion into one supported by robust institutional governance. The role of the modern Shari’a scholar is no longer confined to issuing fatwas. Today’s governance framework integrates scholarship with regulation, risk management, and corporate governance, recognizing that effective oversight requires both jurisprudence expertise and an understanding of contemporary financial markets.

The establishment of the HSA has also enhanced the UAE’s international reputation. For foreign investors and multinational financial institutions, a centralized governance framework provides greater legal certainty. It demonstrates that Islamic banking in the UAE is not governed by isolated institutional practices but by a coherent national framework supported by legislation and regulatory oversight.