April 13, 2024

Exposure draft on Islamic financial institutions issued in Bahrain

The exposure draft of the governance standard on the revised Sharia framework for Islamic financial institutions has been jointly issued by the industry’s two leading global standard setting bodies.

Developed through a collaboration between Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and Malaysia-based Islamic Financial Services Board (IFSB), the standard once finalised, will replace fully, or partially, certain earlier standards issued previously by both institutions.

The exposure draft was approved respectively by the AAOIFI Governance and Ethics Board (AGEB) and the technical committee of IFSB, after a rigorous joint effort by both primary standard-setting institutions, with due involvement of regulators and stakeholders through their contribution as joint working group members.

AGEB chairman Farrukh Raza stated: “I would like to express my appreciation to AGEB, IFSB’s technical committee, the joint working group members, the joint Sharia committee and the secretariats of AAOIFI and IFSB for their efforts and dedication which aims at addressing the evolving needs of the global Islamic finance industry.”

He added: “I am confident once this standard is finalised it will improve the quality of Sharia governance across Islamic financial institutions around the globe, while optimising the costs by providing comprehensive guidance on best practices for various elements of Sharia governance.”

Omar Ansari, the secretary general of AAOIFI stated: “We are pleased to have this successful collaboration with IFSB where the efforts of the two leading standard-setting bodies have been combined for the benefit of the Islamic finance industry. We are certain that this collaboration will assist the industry in optimising Sharia governance with standardised and harmonised guidelines. I look forward to maintaining our mutual collaboration in supporting the needs and development of the Islamic finance industry.”

The release of the exposure draft invites the public comments to facilitate the stakeholder engagement process, multiple public hearings will be conducted over the coming weeks.

Any suitable changes and improvements suggested by the industry stakeholders and received in public comments will be incorporated to the draft.

The final standard will be issued after the due process of reviews and approvals by both institutions.

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