Fatwa
A fatwa is a scholarly legal opinion on a question of Islamic law. In finance it is the ruling — from an individual scholar, an institution's Sharia board or a national authority — that a product, structure or transaction is or is not compliant.
Also called: fatwas · fatawa · Sharia opinion · Sharia ruling · Sharia pronouncement
A fatwa answers a specific question on specific facts. Its authority depends on who issued it and on the framework the institution operates under. A fatwa from an institution's own Sharia Supervisory Board governs that institution's products; a ruling from a national central Sharia body may bind every institution in the jurisdiction and even the courts; an academy such as the International Islamic Fiqh Academy issues resolutions that are highly influential but not directly binding.
For product approval, a fatwa is usually supported by a review of the actual documents and a later Sharia audit to confirm that the institution did what the fatwa described.
In practice
A fatwa approving one sukuk, fund or product does not approve every product built along the same lines. It covers the structure and facts put to the scholars, and it does not replace legal or regulatory approval.
Commonly confused with
| Term | How it differs |
|---|---|
| Posek | A posek issues rulings in Jewish law. The roles are comparable, but a fatwa is a ruling under Islamic law, often issued in finance by a board rather than an individual. |
See also
- Sharia Supervisory BoardA Sharia Supervisory Board is the panel of scholars responsible for reviewing and overseeing an Islamic financial institution's compliance with Sharia — approving products and contracts, issuing rulings and reviewing whether operations follow them.
- AAOIFIAAOIFI, the Accounting and Auditing Organization for Islamic Financial Institutions, is a Bahrain-based international standard-setter whose Sharia, accounting, auditing, governance and ethics standards are widely used in Islamic finance.
- ShariaSharia is the broad body of Islamic norms and law derived from the Qur'an and the Sunnah; in finance it supplies the principles that jurists turn into concrete rules for contracts, ownership, debt and exchange.
- PosekA posek is a rabbinic authority who issues rulings on questions of Jewish law.