IFIs reputation is highly dependent on the perception of customers with respect to Shariah Compliance and issues surrounding investor’s protection given the traditional reliance on the deposit products etc. Key challenges that Islamic banks face need to be tackled effectively. These challenges are interlinked and mutually reinforcing and range from: Reputational risk arising out of any uncertainty on Shariah compliance.
Success of an Islamic financial system is based on stakeholders believe that the system is Shariah Compliant. This single factor intensifies the role of good corporate governance to ensure that the faith of stakeholders is not compromised and the system sustains and grows smoothly. The reputational risk factor i.e.