IslamicFinance.de

Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.
Islamic banking is overhauling rules that govern the conduct of its influential sharia advisers, with competition for investor dollars and a growing market putting pressure on the once-arcane industry to adopt clearer, more uniform guidelines.
Bahrain-based industry body AAOIFI is drafting rules to regulate sharia scholars' shareholdings in banks and address concerns such as the number of sharia supervisory boards on which a single scholar can effectively serve.
The International Sharia Research Academy for Islamic Finance, which is backed by Malaysia's central bank, is planning a global regulatory body for sharia advisers.

On 21st of September this year the meeting took place between Dr. Muhammad Nedal Alchaar Secretary general of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and the Russian association of experts in Islamic financing .
On the meeting the experts exchanged their opinions concerning prospects of development of Islamic financial institutions and products in Russia, application of AAOIFI standards in the field of accounting, audit and norms of Shariah, and also actual world tendencies of the young industry.
Doctor Alchaar has informed that now the AAOIFI members consist of 220 Islamic financial institutions from 46 countries of the world and informed about the basic aspects and complexities of development of the Islamic finance in separate countries, in particular, in the UK, France and the USA.

In 2010 Qatar Islamic Bank signed a Memorandum of Understanding with Banque Populaire Caisse d'Epargne, France's second largest banking group, in order to gain access to the French retail banking and small medium-size business markets. Recently, Paris Europlace signed an agreement with AAOIFI paving the way for greater cooperation to drive the development of Islamic finance in France.

The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is co-operating with the Mufties Council of Russia to translate AAOIFI's international Islamic finance standards into Russian language. The translated standards are expected to help regulatory authorities and financial institutions in developing Islamic finance in jurisdictions that use Russian language as their official language.

The report on Social Responsibility Trends at Islamic Financial Institutions presents the results of an extensive survey on Social Responsibility at Islamic Financial Institutions (IFIs) carried out during summer and fall of 2009 by DinarStandard and Dar Al Istithmar with the support of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI).

Some key findings of the survey were:

Clients: 100% of respondents answered yes to having a policy to screen prospective clients which is actively implemented. Similarly 97% have an organizational policy that deals with client responsibly.

Employees: 83% of respondents’ state having policies that provide equal opportunity to all their employees, 93% have policies that ensures merit-based salary and promotion, and 86% having policies that specifically prohibits any kind of discrimination. However, when it comes to having policy to monitor employees from different backgrounds and gender, the response was mix with only 52% admitting to having such a monitoring policy and 48% not having any such policy.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will seek a mandate from its trustees to examine the degree of sharia financial products' compliance with its 40 standards, its secretary-general, Mohamad Nedal Alchaar, said according to Liau Y-Sing from Reuters.

Lack of common standards makes it difficult to sell products across borders, while possibly enhancing innovation.

New Horizon reported that other IT vendors now think about certification by the Accounting and Auditing Organisation of Islamic Financial Institutions (AAOIFI) and following the example of Path Solutions.

Liau Y-Sing reported on Reuters, 5 March that Malaysia's stock exchange will launch in June a platform to allow banks to execute Commodity Murabaha transactions, a popular but controversial Islamic contract with a market worth more than USD 100 bn according to the International Islamic Financial Market. Any tangible asset that is sharia-compliant can be used in commodity murabaha transactions and palm oil is one obvious example. Malaysia is the world's No. 2 palm oil producer.

But some religious scholars have criticised the structure, saying it resembles conventional-based lending instruments. The Accounting and Auditing Organisation for Islamic Financial Institutions is of the view that the contract, while not invalid, is not ideal.

Dear Readers,

Please see my explanation to the recent Sukuk debate layed out in two articles.

Best regards,

Michael Saleh Gassner