Sharia Governance in Portfolio Management Companies: The Case of Turkey and Malaysia

The discovery of oil in the Gulf region, and the subsequent tripling of oil prices as a result of the oil crisis in 1973, caused a capital flow called petro-dollar, and this led to large capital accumulations in the hands of oil exporting Arab countries (Öztürk & Saygın, 2017, p. p. 3). This capital accumulation encouraged Islamic Banking and Islamic finance, which started in the field of banking with Dubai Islamic Bank, the first commercial Islamic bank established in 1975, is now 3.1 trillion USD with banking, takaful and Islamic capital markets (Participation Finance Strategy Document, 2022, p. 29) level has been reached. In this study, it is aimed to take a picture of the status of the shar'a governance structure in the portfolio management companies serving in Turkey and to what extent the laws require shar'a governance, and then what to do to determine the shar'a risks in Turkey and minimize them. It is aimed to give recommendations on the necessity of Islamic capital markets and the most preferred investment instruments of these markets were examined. In the context of Islamic indices, stocks, sukuk and mutual funds are discussed in detail. Islamic portfolio management companies, which are important actors of Islamic capital markets, are discussed in the context of shar'a governance, and shar'a governance systems in Turkey and Malaysia are compared. Sharia governance structures in both Turkey and Malaysia were evaluated by examining the legal regulations, and the common aspects and differences were detailed in the context of Sharia governance. As a result of this comparison, it has been determined that Turkey does not have a regulation for Islamic portfolio management companies and portfolio management companies that manage funds in accordance with Islamic rules have deficiencies in their Shariah governance structures, and suggestions are made on how to overcome these deficiencies. The shar'i risks created by the deficiencies in the shar'a governance structure were evaluated and the necessary mechanisms to minimize these risks were discussed and the steps to be taken to keep the risks at a low level were explained.