Disclosure in Islamic Finance: The Case of Illgitimate Income

Abstract

Disclosure in Islamic finance is very important this will pave the way for Shariah Supervisory Board (SSB) to find suitable Shariah rules for illegitimate income after the disclosure has been made by Islamic banks. There are many evidences that show the important of spending toward the way of Allah but these evidences are not specified that this earning comes from Non halal income. As there are many Islamic banking dealing with conventional banks. What are the legal rulings of dealing with the conventional banks or institutions income? Although there are some Fatwa and Standard from regulatory body of Islamic financial Institutions that permit that these Non halal incomes or earning should be disposed off for charity purposes. It is mentioned in the guiding principles on Corporate Governance Standard issued by Islamic Financial Services Board (IFSB) that "operations of Institutions offering only Islamic Financial Services (IIFS) including aspects such as Non halal or Shariah compliant income review, investment policies, disposal of non Shariah compliant income for charitable activities". But it does specify the policy and how to distribute these illegitimate earning. This paper will focus on the objectives and purposes of seeking legitimate earnings, disposal of illegitimate earning, what are the policies for disposing illegitimate income in Islamic financial institutions. This paper will also explain and analyze Fatwa on the policies to be follow in spending of Non halal income which the Islamic Financial Services Board in its Shariah meeting with Shariah Advisory Committee (SAC) of Islamic Development Bank in Dubai on 30h October 2007 received.