Chapter 22 Shari’ah Governance in Shari’ah -based Cooperatives in Malaysia and Indonesia

Cooperatives are formed with the idea of cooperation. Due to their features, cooperatives have the potential to address the issue of poverty alleviation and improvement in income distribution, which currently is the central focus of governments' economic policy making. Currently, Islamic cooperatives or shari'ah-based cooperatives have also been developing well. Shari'ah-based cooperative is essentially the transformation of conventional cooperative through an approach in line with the Shari'ah principles. It could be one of the best solutions in supporting Islamic banking and finance for unbankable customers. This chapter describes the development of cooperatives in Malaysia and Indonesia. The chapter also discusses the need for cooperative governance and highlights the features of cooperatives that results to their governance is more complex that the governance of business organisations. This chapter also highlights laws, regulation and shari'ah governance measures taken by both jurisdictions to promote growth of shari'ah-based cooperatives.