Islamic finance group clarifies industry regulations

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI), the international standard-setting organisation for Islamic finance, has clarified the industry’s regulations in two new reports.

The Shari’a Standards 2010 publication contains a total of 41 Shari’a standards including stipulations for gharar (uncertainty) in financial transactions, arbitration, waqf (endowment), ijarah (leasing) on Labour, zakah (alms), contingent obligations, credit facilities, online financial transactions, rahn (pledge), investment accounts and profit distribution, and Islamic reinsurance.

Another publication, Accounting, Auditing and Governance Standards 2010, contains a total of 40 standards covering the areas of accounting, auditing, ethics, and governance for Islamic financial institutions.

Among the new standards included in the publication are an accounting standard on investments in associates, a statement of governance principles, and a governance standard on corporate social responsibility.

Dr Mohamad Nedal Alchaar, Secretary General of AAOIFI, said that the standards would help Islamic financial institutions throughout the world to ensure that the products and services they offered complied with Shari’a.

“The standards have also managed to introduce a high degree of harmonisation of Islamic finance practices across the major Islamic finance markets and consequently place the industry in a stronger position to expand,” he said in a statement.

Development of AAOIFI’s standards was undertaken by its Shari’a Board – acknowledged as the leading global authority on Shari’a for international Islamic finance – and Accounting and Auditing Standards Board.