The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in the 21^st meeting of its Governance and Ethics Board (AGEB / the board) approved the issuance of the exposure draft of governance standard on Islamic crowdfunding.

Islamic crowdfunding is one of the fastest growing segments of Islamic FinTech and it is expected to have a significant impact on the development of Islamic finance products and services in the times to come. The board felt the need to develop a standard on Islamic crowdfunding that will contribute to the implementation of good governance and Shari’ah governance practices for Islamic crowdfunding and would help the industry to enhance public confidence in the Islamic crowdfunding sector. It will further assist in economic development through the promotion of entrepreneurship, greater availability of Shari’ah compliant investments at the retail level and the development of the social finance sector.

The draft standard covers various aspects of governance and control systems including but are not limited to compliance with Shari’ah principles and rules, safeguarding the interest of various stakeholders, controls relevant to the information technology and data protection etc.

Mr. Farrukh Raza, Chairman AGEB – at this moment stated: “the Islamic finance industry is keen to keep pace with the recent developments in FinTech and we are aware that additional layers of challenges and obstacles exist in terms of both Shari’ah and governance. Islamic crowdfunding has proven to be an essential source of alternative finance over the past few years. I anticipate that it will play a significant role in shaping the way Islamic finance operates in the coming years”. He added: “Since it is a matter of public money, AGEB is of the view that it is necessary to ensure good governance in the whole process to avoid putting Islamic crowdfunding at risk, potentially causing reputational risk to the whole Islamic finance industry.”

On this occasion, Mr. Omar Mustafa Ansari, the Secretary General, AAOIFI stated: “I would like to thank the board and the relevant working group members for their tremendous efforts and remarkable devotion”. He added: “I am optimistic that the governance standard on Islamic crowdfunding will assist in developing a strong governance practice in the industry, thereby, promote trust among stakeholders. This will eventually lead to a just and equitable model of Islamic finance based on such structures. He concluded: “AGEB has taken multiple initiatives for the development of standards in different areas of FinTech. The governance standard on Islamic crowdfunding is the first of such projects.”

The public hearings for the standard will be held in the upcoming months in different parts of the world to obtain industry feedback on the exposure draft.

Further details with respect to dates and venues, will be announced shortly via the AAOIFI website. Comments on the exposure draft are welcome and should be directed no later than 15 December 2021 to governance@aaoifi.com. All comments and suggestions of the public hearings and written comments will be presented to AGEB to discuss and to make necessary changes before issuing the final standard.

The exposure draft on Islamic Crowdfunding Governance can be accessed by CLICKING HERE