Impact of Shariah Governance Framework, Shariah Supervisory Board, and Shariah Advisory Committee on Islamic Financial Institutions' Performance in Pakistan

Abstract

This study investigates the impact of the Shariah Governance Framework, Shariah Supervisory Board, and Shariah Advisory Committee on the performance of Islamic Financial Institutions (IFIs) in Pakistan. Focusing on Islamic banks, Takaful companies, Modaraba firms, and Islamic windows of conventional banks, the research explores how governance structures, organizational strategies, and decision-making processes influence institutional performance. Data were collected from 550 managerial employees across 22 Islamic financial entities using a stratified random sampling technique. A structured questionnaire, developed from validated prior studies and employing a five-point Likert scale, served as the primary data collection instrument, administered both physically and via Google Forms to ensure broad accessibility and high response rates. Descriptive statistics and regression analysis were conducted using SPSS, while PLS-SEM was utilized for construct validation and path modeling. These results underscore the strategic importance of robust Shariah governance in driving sustainable performance across Pakistan’s Islamic finance sector. It is recommended that regulatory bodies standardize Shariah governance practices across institutions to ensure consistency and transparency. Innovative integration of AI-based compliance tools may further enhance decision-making efficiency within Shariah-compliant frameworks.