04 May 2026

PR/06/2026

The Accounting and Auditing Organization for Islamic Financial Institutions’ (AAOIFI) Governance and Ethics Board (AGEB / the board) discussed the proposed exposure draft of the governance standard (GS) “Conversion of a Conventional Financial Institution into an Islamic Financial Institution” at its 45^th meeting, held on 28 April 2026, via video conferencing.

The proposed standard aims to provide a comprehensive governance framework, while complementing the requirements of relevant AAOIFI Shari’ah Standards (SSs), to appropriately govern and implement the process of conversion of a conventional financial institution (CFI) into an Islamic financial institution (IFI) in a manner that upholds Shari’ah principles and rules and safeguards stakeholders’ interests. The proposed standard sets out governance requirements covering, among other matters, the conversion plan, pre-commencement considerations, ongoing considerations during the conversion process, conversion monitoring and periodic reporting, the conclusion of the conversion process and post-conversion activities.

The board discussed substantial sections of the proposed exposure draft in detail and directed the secretariat to make the necessary revisions in light of the discussions and resolutions of the meeting. It was agreed that certain matters would be further considered by the respective working group and subsequently brought back to the board for continued deliberation at an upcoming meeting.

Mr. Farrukh Raza, chairman of AGEB, stated: “I would like to extend my sincere appreciation to the board, the respective working group and the secretariat for their dedicated efforts and continued commitment to this project. I believe this initiative is timely and significant, particularly at a time when a growing number of CFIs are considering or undergoing conversion into IFIs, including large scale conversions in several markets. The proposed standard seeks to provide a structured governance framework to support such transitions in a manner that upholds Shari’ah principles and rules, safeguards stakeholders’ interests and strengthens confidence of the stakeholders on the Islamic finance industry. I expect that this standard, once finalised, will lead towards sound and sustainable growth of the Islamic finance industry”.

On this occasion, Mr. Omar Mustafa Ansari, Secretary General of AAOIFI, stated: “I am pleased with the progress made in developing this proposed standard and with the valuable comments and guidance received during the board’s deliberations, which will help further strengthen and refine the proposed standard. The discussions have reaffirmed the significance of this initiative in responding to an important and growing market need through a sound governance framework to support conversion processes in a structured, credible and effective manner”. He added: “I am confident that the continued deliberative process involving the respective working group and the board will further enhance the quality and practical relevance of the proposed standard and contribute to developing a robust reference point for institutions undertaking conversion processes”.