THE INTERNAL SHARI'A SUPERVISION ACTIVITIES

THE INTERNAL SHARI'A SUPERVISION ACTIVITIES
IN ISLAMIC BANK
(A Case Study at BPRS Bakti Makmur Indah Sidoarjo, Indonesia)

Abstract
The shari’a compliance is the major and basic aspect that differentiates Islamic bank from the conventional one. The Islamic bank must have an independent institution that is assigned to supervise the conformity of bank operational with Islamic shari’a rules and principles. The main role and function of shari’a supervisory board in Indonesia to conduct internal shari'a supervison is not optimum yet caused by organization and human resource factors. The research question of this research was “How does the internal shari'a supervison activities by shari’a supervisory board with internal audit function to create shari’a compliance in Islamic bank ?". The purposes of this research were to find efforts to maximize roles and functions of shari’a supervisory board and to find the formulation of integrated and effective mechanism of shari’a compliance supervision.
This research was a qualitative study using single case study approach. The object of the study was PT BPRS Bakti Makmur Indah Sidoarjo, and the respondents of the study were chairman and members of shari’a supervisory board, internal auditor, and operational management director. This research was more focused on shari’a supervisory board and internal audit activities in conducting direction and supervision of shari’a compliance in Islamic bank. This research was conducted through four steps study, i.e. the holistic exploration, focused exploration, confirmation, and data interpretation.
The result of this research showed three general phenomena i.e. 1) the control of Shari‘a compliance was based on trustworthy between shari’a supervisory board and management, 2) there were two level of shari’a compliance that must be applied by the bank operational i.e. compliance toward fatwas of national shari'a board and compliance toward Islamic shari'a rules and principles, and 3) shari’a supervisory board merely held passive review, and played as shari’a consultation media toward the management instead of the reviewer or shari’a compliance controller. One alternative to maximize the role and function of shari’a supervisory board is by creating an integrated internal shari'a supervision mechanism between shari’a supervisory board and internal audit function to develop an effective shari’a compliance control mechanism in Islamic banks.

Keywords : shari’a compliance, shari’a supervision, shari’a supervisory
board, internal audit.