KUALA LUMPUR (Aug 1): The Association of Seniors in Islamic Finance (ARIF) is calling for stronger governance among Islamic finance based government-linked companies (GLCs) and government-linked investment companies (GLICs), following the findings and recommendations presented in the Royal Commission of Inquiry (RCI) report concerning Tabung Haji.  

“ARIF wishes to emphasise that appointments to the positions of chairman and board member of Islamic finance–based GLCs and GLICs must be regarded as a significant public trust owed to the rakyat and all stakeholders. These positions should not be treated as a form of reward, recognition, or appreciation for any particular status or contribution,” said the association in a statement on Aug 1.  

It said that individuals appointed to such positions must possess high integrity, sound professional track record, independence of judgment and the ability to discharge their fiduciary duties effectively. 

ARIF also added that the RCI report serves as a reminder that strong, independent and professional governance is fundamental to the sustainability of any institution entrusted with public funds. 

The association proposed three measures to further strengthen the governance of Islamic finance-based GLCs and GLICs. The first being to have a chairman that is independent from active political influence in bids to avoid any conflict of interest.

“... whether actual or perceived by the public, individuals who are actively holding political office should not be appointed as chairman of Islamic finance–based GLCs or GLICs. The position should instead be held by individuals who are independent, credible, and possess relevant corporate experience,” it said. 

It also proposed that board members on such boards should possess sufficient understanding of Islamic finance, given that Islamic finance institutions operate within a specialised Islamic finance and governance framework. 

Thirdly, ARIF proposed that the appointment of individuals to the board should be based on merit and professional competence. 

It emphasised that appointment of individuals, who are active in politics as board members, be required to meet professional competency standards comparable to those expected of other corporate directors.

“ARIF firmly believes that appointments based on merit, competence, integrity, and independence are fundamental principles that should guide all GLCs and GLICs operating within the Islamic finance ecosystem. Good governance not only protects national assets, but also ensures that public trust is managed in a transparent, professional, and accountable manner,” it said.

ARIF added that the primary focus should be on building a stronger governance framework, enhancing board professionalism and restoring public confidence in the nation’s Islamic finance institutions.