Good Corporate Governance in Islamic Financial Institutions: A Literature Review

Abstract

This study aims to analyze the concept of Good Corporate Governance (GCG) in Islamic financial institutions through a literature review, identify the main principles of corporate and Shariah governance, and examine the role of the Shariah Supervisory Board (SSB) and other supervisory mechanisms in supporting transparency, Shariah compliance, risk management, stakeholder trust, and institutional performance. This study employs a library research method using a qualitative and descriptive-analytical approach. The data sources consist of scholarly journal articles, academic books, previous research findings, international institutional documents, Shariah governance standards, and regulations related to Islamic financial institutions. The literature was analyzed by identifying, classifying, comparing, and synthesizing relevant findings according to themes including GCG principles, Shariah governance, SSBs, transparency, accountability, risk management, Shariah compliance, and institutional performance. The findings indicate that GCG in Islamic financial institutions is more complex than in conventional financial institutions because it integrates corporate governance with Shariah governance. The SSB represents a key distinguishing element; however, effective governance requires coordination among the board of directors, board of commissioners, SSB, internal audit, compliance functions, risk management, external auditors, and regulators. The study concludes that effective GCG should emphasize substantive Shariah compliance, transparency, accountability, stakeholder protection, and maslahah, rather than merely fulfilling formal governance structures and regulatory requirements.