Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic International Rating Agency (IIRA) signed a Memorandum of Understanding (MOU) to formalise and strenthen cooperation in achieving their shared goals for the development of the Islamic finance industry.

The MOU was signed by the Chairman, AAOIFI Board of Trustees, Sh. Ebrahim bin Khalifa Al Khalifa and President – Strategic Planning and Global Relationships of IIRA, Mr. Faheem Ahmad at the AAOIFI head office during the AAOIFI 19th Annual Shari’ah Boards Conference held virtually on 12-13 October 2021.

Islamic financial institutions (IFIs) not only have to demonstrate financial strength and stability, but it is also important that they comply with Shari’ah rules and principles in all their activities, operations and act as responsible fiduciaries. And with the developing Islamic finance industry there is an equally growing need to promote the core values of transparency, integrity, quality and independence, in addition to have Shari’ah compliance among the market participants.

AAOIFI developed its governance standard in cooperation with IIRA on Shari’ah Compliance and Fiduciary Ratings for Islamic Financial Institutions (GS 10) which was issued in December 2019. This standard sets out principles for the rating agencies to be applied for Shari’ah compliance and fiduciary rating of Islamic financial institutions (IFIs). It also provides principal guidance on the responsibility, acceptance, process, reporting and quality assurance for such services. However, rating agencies are free to develop their own detailed methodologies for such ratings including the rating scales.

On this occasion, Mr. Omar Mustafa Ansari, Secretary General, AAOIFI stated, “AAOIFI and IIRA have common objectives of developing and progressing the Islamic finance industry. Both institutions have jointly developed a governance standard on Shari’ah compliance and fiduciary ratings for institutions, and are curently working on another standard on ratings for instruments. This MoU only formalises this co-operation and provides a platform for further strengthening the relationship between the two organizations”.

Mr. Faheem Ahmed said: “With the signing of this Memorandum of Understanding, IIRA and AAOIFI have formalized their committment to jointly pursue a shared mission. As infrastructure institutions for Islamic finance, we aim to collectively promote high standards and homogenization of practices in the global Islamic markets. As such we have collaborated in the past by working together in areas of mutual interest, and with this MoU, will continue to broaden the scope of our efforts towards a common goal.”