Roundtable No. 1 – Shari’ah – compliant alternative benchmark rates

1st AAOIFI roundtable on

Issues and challenges for Islamic finance in adopting alternative benchmark rates and finding an Islamic benchmark rate (virtual)
Wednesday, 18 January 2022 (Jumada II 15, 1443 AH)


Since the recommendation of Financial Stability Board in 2014, a lot of work has been undertaken by financial regulators and other stakeholders to make reforms in the benchmark interest rates. These reforms are generally resulting in the replacement of IBOR based benchmark rates with risk-free rates (RFRs).

Islamic Financial Institutions (IFIs) are different from their conventional counterparts in many aspects. To uphold the trust and interest of various stakeholders, it is a must that the transactions carried out by IFIs remain compliant with Shari’ah principles and rules. Shari’ah scholars have, in the past, allowed the use of conventional benchmarks for pricing of the Shari’ah compliant products. However, need has always been felt to have independent benchmark profit rates for the Islamic finance industry. This has become more important in view of the methodology of application of the RFRs in the financing contracts, which is generally on a retrospective basis.

In this regard, AAOIFI has initiated multiple projects including developing a governance standard on alternative benchmark rates, in collaboration with other Islamic finance infrastructure institutions. This is the first in a series of roundtables on the subject, which aims to discuss and deliberate on the issue and its implications on the Islamic finance industry from Shari’ah, regulatory, legal, accounting, and governance perspectives.

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