IslamicFinance.de

According to rating agency Standard & Poor’s, due to the fast growth of the Islamic finance industry a robust Sharia governance structure is very important. While the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) have already made strides in this area, S&P believes the current governance framework shows room for improvement. S&P's Global Head of Islamic Finance Mohammad Damak said the industry would benefit from increased disclosure, as well as clear standardised Sharia principles and interpretation. Analysts say as Islamic finance industry expands, enhanced Sharia governance framework could address risks related to conflicts of interest. Only a handful of Islamic banks disclose their profit and loss sharing formulas, profit equalisation reserves, or investment risk reserves. Actions requested by internal auditors are typically not disclosed to the public. So far only the authorities in Oman and Pakistan have asked Islamic banks to submit themselves to an external Sharia audit.