AAOIFI issues three final governance standards for industry adoption

The Governance and Ethics Board (AGEB / board) of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) issued three final standards namely, AAOIFI Governance Standard (GS)  10, “Shari’ah Compliance and Fiduciary Ratings for Islamic Financial Institutions”, GS 11 “Internal Shari’ah Audit for Islamic Financial Institutions”, and GS 12 “Sukuk Governance”.

In 2018, the projects were initiated and completed the various phases of standards development process which starts from preparing the preliminary study and consultation notes to issuing the exposure draft for industry feedback. The standards were discussed substantively in several public hearings. AGEB deliberated on the comments received during the public hearings, and in writing. Accordingly, the board directed the secretariat to finalize and issue the standards.

The “Shari’ah Compliance and Fiduciary Ratings for Islamic Financial Institutions” standard was presented in eight countries, namely: Bahrain, Pakistan, UAE, Saudi Arabia, Sudan, Oman, Malaysia, and Turkey, as part of the public hearing phase. The objective of the standard is to introduce and set out a principle-based guidance in Shari’ah governance and fiduciary ratings. It provides independent and comparable assessment based rating (or scoring) to the stakeholders with regards to an Islamic Financial Institutions (IFI), adherence to Shari’ah compliance, governance and fiduciary responsibilities.

AAOIFI GS 11 is “Internal Shariah Audit for Islamic Financial Institutions”. This standard is built on GS 3 “Internal Shari’ah Review” issued in 1999. Accordingly, it aims to supersede GS 3. The revised internal Shariah audit standard was presented in three countries, namely, Malaysia, Bahrain and Pakistan. It provides improved guidance on internal Shari’ah audit in IFIs and prescribes the compliance, quality control and ethical requirements, objectives and organizational structure along with the professional requirements with regard to the principal procedures, documentation and reporting for internal Shari’ah audit.

On the other hand, AAOIFI GS 12 “Sukuk Governance” is part of a comprehensive Sukuk project that was initiated by AAOIFI in 2015 to develop and revise the standards on Sukuk, in line with the changes in the field over the last two decades. It provides detailed guidelines on Sukuk governance to the IFIs and corporates worldwide, by specifying a comprehensive framework for managing Sukuk issuance, management during investment and maturity / termination phases.  This standard was presented in five countries, namely, UK, Morocco, Egypt, Pakistan, and Saudi Arabia.

Dr. Ishrat Husain, AGEB Chairman, thanked all board members for their tremendous efforts.  He added “It is expected that these standards will harmonize the industry practices and improve governance practices. I would like to emphasize on the excpetional performance of AGEB during the past year and to thank all board members for their outstanding contribution”. He also thanked Mr. Omar Mustafa Ansari and other members of the secretariat for their continous support.

Sheikh Esam Ishaq, AGEB deputy Chairman, stated  “We are pleased to issue these standards which cover key areas and expect that they will contribute toward better standardisation and harmonisation of the global Islamic finance industry. Additionally, we are confident that they are in line with best practices and should support a more wholesome growth of the industry globally ”.

Mr. Omar Mustafa Ansari, Secretary General, AAOIFI stated: “On behalf of AAOIFI and its board of trustees we would like to thank AGEB members for the term (2015-2019) for their support, effort and valuable contribution. He added “Sixteen public hearings were held  in eleven countires as part of the public consultative phase of the three standards development process. These standards are expected to strengthen public and stakeholders’ confidence in the Islamic finance industry”.

The three standards can be accessed through the following link: http://bit.ly/2TeAzhF