There is an interesting discussion about 'scholar shopping' going on at the Global Islamic Finance Resources group on LinkedIn. Without trying to summarize the discussion, I think it is an interesting topic that merits a brief outline of my opinions.
The practice of 'scholar shopping' is usually described where a financial institution asks multiple scholars to approve a given product until they are able to find a scholar who will approve it. Usually it is put forward as with negative connotations towards the industry as a whole, particularly with regards to the industry's legitimacy or authenticity. I don't necessarily agree with this perspective. While scholars hold relatively similar views on what is and is not Shari'ah-compliant, there are differences and this is healthy. There would be no debate if there were not any differences in opinion, and also no innovation.
However, the greater question that I believe underlies the concern over scholar shopping is a question of whether there are (real or perceived) conflicts of interest introduced by the process through which a product is approved. I believe there is a perceived conflict of interest. It can be viewed as an example of regulatory capture: the regulators (Shari'ah scholars) are to some degree reliant on the industry they are supposed to regulate for their compensation. It may be that in the vast majority of cases, scholars act entirely based on their own interpretation of the Shari'ah and their compensation has no impact at all on their rulings. However, there remains a perception that there is some conflict of interest between their role as regulators (working on behalf of the consumers) and their status as employees or consultants of the institutions selling the financial products.
This perception of a conflict of interest does not mean that there is a conflict of interest, nor should Shari'ah scholars be forced to work for free. They have a specialization beyond that of most people within their field of expertise. However, the particular way in which they receive compensation is tied to their approval for a given product and that leads to reports of 'scholar shopping' which could reduce the level of trust between consumers and the Islamic finance industry generally that is beneficial to no one.
There are three possible solutions in my eyes to this problem, two of which are practicable and one of which is likely not (at least globally). The solution that is impracticable is to have a global regulatory body which approves all Shari'ah-compliant financial products and where the Shari'ah scholars are paid directly by that global body and not by the institutions that make up the industry. This is impracticable because there will likely never be complete agreement on a global set of Shari'ah standards and this would hamper the growth of the industry and bias it towards using the most basic products in use now for which there is more or less consensus. This would set back by many years the solutions to the significant problems facing Islamic banks like liquidity management and transactions used to hedge against currency, interest rate and commodity price fluctuations.
The two that are more feasible in my eyes are:
1) The development of more Shari'ah advisory firms that are structured like law firms. The Shari'ah scholars are paid by the advisory firm, which coordinates the Shari'ah approval process and the Shari'ah scholars are paid for the time they spend on a given product, whether or not it is granted approval as being Shari'ah-compliant. This insulates the scholars from the perceived conflict of interest in the current system, particularly if they receive per-project fees which are more tightly linked with approval of a given product. This solution would also present an opportunity for multiple scholars' views to be put forward within the process without the cost of expanding the Shari'ah board by a full member. This would also allow the rotation of scholars or Shari'ah advisory companies throughout the life of a product to allow for the the greatest degree of oversight about a product's Shari'ah compliance.
2) The development of a centralized body which keeps track of the products approved by each Shari'ah scholar as well as the details of the structure of each product that would be publicly available. There could be some window of time (1-2 years) where product structures are kept confidential to prevent their adoption immediately by competing Islamic financial institutions who would be able to free-ride on the costs borne by the developer of the product structure. This centralized database could provide consumers and industry participants with a way to see whether a given Shari'ah scholar had consistently approved products which other scholars objected to. However, the real value (and use for the database) would be to create a paper trail which could be offered as a defense against claims of 'scholar shopping'. The Shari'ah scholar's credibility has (and always has) depended upon him being viewed as an impartial judge of a product's Shari'ah compliance for the benefit of consumers and creating a forum that can show this through the history of his approvals would be extremely valuable. It could bolster the credibility for scholars by demonstrating that the majority of their approvals are within the bounds of what other Shari'ah scholars are approving and this evidence would severely undermine future claims of 'scholar shopping'. If all scholars approve of a given structure in different contexts, then there is not likely to be any need for institutions to 'scholar shop'. It would also provide a forum where less well recognized scholars can establish a track record that they can use to become more well recognized, which could help add to the body of globally-recognized scholars.
Neither of these ideas is entirely new, nor would they represent a panacea, but accusations of 'scholar shopping' reveals that there are questions about perceived conflicts of interest that need to be addressed. The sooner they are addressed (and shown to be generally only perceived and not actual conflicts), the better for the Islamic financial services industry as a whole.
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