The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in the 24^th  meeting of its Governance and Ethics Board (AGEB / the board) approved the issuance of the exposure draft of a governance standard on Shari’ah compliance and fiduciary ratings of Sukuk and other Islamic finance instruments.

The prepared standard aims to introduce and set out principle-based guidance on Shari’ah compliance and fiduciary ratings of Sukuk and other Islamic finance instruments. It further seeks to strengthen stakeholders’ confidence in the Islamic finance industry, including the Islamic capital markets. In addition, the said standard is expected to improve transparency by demonstrating the compliance of Sukuk and other Islamic finance instruments with the standards, regulations and best practices related to Shari’ah principles and rules, Shari’ah governance, adherence to values and fulfillment of fiduciary responsibilities.

This standard elaborates on various matters including but are not limited to key compliance requirements applicable to rating agencies, assessment scope and benchmarked parameters as well as documentation, archiving and confidentiality.

Mr. Farrukh Raza, chairman of AGEB at this occasion stated that: “I would like to thank the board and the relevant working group members for their outstanding efforts and dedication to the development of this standard”. He added that: “I believe this standard will significantly assist the rating agencies to provide independent, comparable, assessment-based rating to various stakeholders with regard to the state of Sukuk and other Islamic finance instruments’ Shari’ah compliance and adherence to fiduciary responsibilities by the originator and other organs of governance”. He added that: “once this standard is finalised, I believe it will improve market discipline and enhance the level of transparency in the Islamic finance industry”.

On this occasion, Mr. Omar Mustafa Ansari, the Secretary General, AAOIFI stated that “I would like to extend my thanks and appreciation to the Islamic International Rating Agency (IIRA) for their efforts and contribution in the standard development process”. He added that “It’s a pleasure to announce the issuance of the exposure draft of the standard and I am looking forward towards valuable public comments”.

The public hearings for the standard will be held in the upcoming months in different parts of the world and / or on virtual basis to obtain industry feedback on the exposure draft in addition to comments in writing. Comments on the exposure draft are welcomed and should be directed no later than 15 March 2023 to governance@aaoifi.com. All comments and suggestions of the public hearings and written comments are presented to AGEB to discuss and to make necessary changes before issuing the final standard.

The exposure draft of the governance standard on Shari’ah compliance and fiduciary ratings of Sukuk and other Islamic finance instruments can be accessed by CLICKING HERE