31 December 2025

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Governance and Ethics Board (AGEB / the board) approved, in principle, the reissuance of the exposure draft (ED) of AAOIFI Governance Standard (GS) _ “Development and Governance of Shari’ah-Compliant Benchmark Rates” in its 42^nd and 43^rd meetings.

The ED of GS _ “Development and Governance of Shari’ah-Compliant Benchmark Rates” was initially issued for public consultation in 2022, pursuant to a board decision to develop illustrative models of Shari’ah-compliant benchmark rates, in line with the requirements of the standard, and to include them as appendices at a later stage. In 2025, following extensive reviews and deliberations by the respective working groups, the board reviewed the subsequently developed appendices, namely “Illustrative model: Shari’ah-compliant benchmark rate based on macro-level economic indicators” and “Illustrative model: Shari’ah-compliant benchmark rate based on Islamic financial market data”. These illustrative models set out the structure, characteristics and workflow underlying a Shari’ah-compliant basis for the calculation of such benchmark rates. Following this review, the board approved, in principle, the reissuance of the ED for public consultation together with the illustrative appendices, and further decided that additional models based on microeconomic variables, as well as, related research materials, would be developed at a later stage in the form of a guidance note.

On this occasion, Mr. Farrukh Raza, chairman of the AGEB, stated: “I would like to express my sincere appreciation to the board, the secretariat and the respective working group for their continued efforts and valuable contributions”. He added: “I am pleased with the reissuance of the ED of GS _ “Development and Governance of Shari’ah-Compliant Benchmark Rates”. I believe it will support markets in laying the foundations for the real-world, large-scale application of Shari’ah-compliant benchmark rates, thereby promoting greater transparency and adherence to Shari’ah principles across Islamic finance transactions”.

Additionally, Mr. Omar Mustafa Ansari, secretary general of AAOIFI, stated: “I believe that this standard, once finalised, will play a vital role in the pricing of Islamic financial transactions and in facilitating the transition away from conventional interest rate benchmarks”. He added: “In terms of the way forward, the public consultation process will commence, during which we will invite comments on the illustrative models from industry stakeholders, regulators, Shari’ah scholars and other interested parties. All feedback received will be carefully reviewed and compiled, and any appropriate changes will be incorporated prior to finalisation”.

The exposure draft of GS _ “Development and Governance of Shari’ah-Compliant Benchmark Rates” can be accessed by clicking on the link below: Link