Contemporary Standards

The development of standards for Islamic banking and finance is a product of the history of modern Islamic retail banking. Although the earliest proponents of cooperative Islamic banking in Egypt, Pakistan, and Sudan receded in importance as the global industry grew as did Iran which adopted wholesale a sui generis system termed Islamic, the geographic poles of global Islamic banking were created: in the Arab Gulf, with Kuwait Finance House and the Dubai Islamic Bank; and in Malaysia, with Bank Islam Malaysia Berhad. The two most influential standards setting bodies are accordingly in the Arab Gulf and in Malaysia. The influence of these two regions or sub-regions of the Arab Middle East and Southeast Asia are not due only to volume of deals, deposits or investments although there is of course a partial causal relationship with these empirical factors, but also with publications and efforts to disseminate standards and raise their visibility by means of road shows, conferences, educational programmes.

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

Based in Manama, Bahrain, the Accounting and Auditing Organization for Islamic Financial Institutions was founded in 1990. It has published some 88 standards and expects to produce and publish more in both English and Arabic in 2015. Per AAOIFI expecting new set of standards summer 2015 (according to telephone conversation with officer there, February 2015).

The English version is out of print. Translating from the existing Arabic shari‘a standards (published Manama Bahrain 2014 , the following are the chapter headings:

  1. Transactions in currency
  2. Bill of settlement and bil of ==
  3. Debtor default
  4. Set off
  5. Guaranty
  6. Converting a conventional bank to an Islamic bank
  7. Transfer of Debt
  8. Murabaha to Purchase Order
  9. Lease and lease to own
  10. Salam sale and parallel salam sale
  11. Manufacturing sale and parallel manufacturing sale
  12. Partnership and Modern Company
  13. Mudaraba
  14. Documentary Trusts
  15. Reward Contract
  16. Trade Documents
  17. Investment Certificates
  18. Possession
  19. Loan
  20. Sale of Commodities in Organised Markets
  21. Capital Documentation (shares and bonds)
  22. Binding Contracts
  23. Agency and the Actions of an Uncommissioned Agent
  24. Syndicated Financing
  25. Combination of Contracts
  26. Islamic Insurance
  27. Indicators
  28. Banking Services in Islamic banks
  29. Control of Judicial Opinion and Differences in Institutional Officers
  30. Monetization
  31. Controlling Risk in Financial Transactions
  32. Arbitration
  33. Trust
  34. Individual Trading
  35. Tithing
  36. Emergency Measures regarding binding obligations
  37. Credit Agreement
  38. Capital Transactions by Internet
  39. Pawning and its contemporary application
  40. Investment Accounts and Profit Distribution
  41. Sale of Commodities in Organised Markets
  42. Financial Rights and Conduct Regarding Them
  43. Currencies
  44. Liquidity Management
  45. Protection of Capital Provider and of Investors
  46. Agency in Investment
  47. Controlling Profit Accounts of transactions
  48. Trust Options

Some exemplary standards and decisions follow:

Financial Accounting Standards

Governance Standards

Sharia Standard No 1 Trading in Currencies

No 2 Debit Card, Charge Card and Credit Card

International Islamic Fish Academy

Resolution No 13 (1/3)

Same (Resolution) No 40-41 (2/5 and 3/5)

50 (1/6)

53 (4/6)

63 (1/7)

64 (7/2)

65 (3/7)

72 (3/8)

85 (2/9)

179 (19/5)

Islamic Financial Services Board (IFSB)

Founded in 2002 in Kuala Lumpur, Malaysia, the Islamic Financial Services Board states as its mission serving ‘as an international standard-setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the Islamic financial services industry, which is defined broadly to include banking, capital market and insurance. In advancing this mission, the IFSB promotes the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing international standards consistent with Sharî’ah principles, and recommend them for adoption.” (IFSB webpage, ‘Background’ accessed 26 May 2014) Some of their published standards are as follows:

Capital Adequacy Requirements of Sukuk, Securitisation and Real Estate Investment 2009

Capital Adequacy Standard for Institutions (Other than Insurance Institutions) Offering Islamic Financial Services, 2005

Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial Services 2007

Guiding Principles on Shari’a Governance Systems for Institutions O Offering Islamic Financial Services 2009

Standards No 4, 6, 8, 10, 18, 21, 22

Capital Adequacy Requirement for Sukuk Securitisation and Real Estate Investment

Guiding Principles on governance for Islamic Collective Investment Scheme

IFSB-5:Guidance on Key Elements in the Supervisory Review Process of Institutions Offering Islamic Financial Services (excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds)

IFSB-4: Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial Services (excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds)

IFSB-3: Guiding Principles on Corporate Governance for Institutions Offering Islamic Financial Services (excluding Islamic Insurance (Takaful) Institutions and Islamic Mutual Funds)

IFSB-2: Capital Adequacy Standard for Institutions (other than Insurance Institutions) Offering only Islamic Financial Services

IFSB-1: Guiding Principles of Risk Management for Institutions (other than Insurance Institutions) Offering only Islamic Financial Services

International Islamic Fiqh Academy

The Jeddah, Saudi Arabia based International Islamic Fiqh Academy is an authoritative but less known source of judicial opinions on Islamic legal matters including those that are commercial in nature or pertaining to Islamic finance and banking. The Fiqh Academy Journal is available (Arabic only) through the webpage.

Other

Other groups that are engaged in research or quasi-juridical activities include the Islamic Research and Training Institute (IRTI) of the Islamic Development Bank, (also in Jeddah), Hawkamah, an institution dealing with matter relating to corporate governance (based in Dubai), and the International Islamic Financial Market (IIFM). Also in Manama Bahrain, the General Council for Islamic Banks and Financial Institutions (CIBAFI) established 2001; it creates directories of banks complying with Islamic precepts and conducts educational projects.