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Regulators & Supporting Institutions

Islamic financial institutions are authorised and supervised by the regulator in the country in which they operate. In addition,  there are two standard-setting bodies : AAOIFI and IFSB. There are also supporting institutions. Click on each of the below institution to have a detailed explanation for their role.

The Accounting and Auditing Organization for Islamic Financial Institutions (known as AAOIFI) was founded in 1991. AAOIFI is based in Bahrain and is non-profit corporate body serving as a standard setter for the Islamic financial institutions. AAOIFI issues standards on: accounting, auditing, governance, ethics and Sharia. Some of the AAOIFI standards include:
Financial Accounting Standards (FAS)
    • AAOIFI FAS 35 "Risk Reserves" [English].
    • AAOIFI FAS 34 "Financial Reporting for Sukuk-holders" [English].
    • AAOIFI FAS 33 "Investment in Sukuk Shares and Similar Instrutments" [English].
    • AAOIFI FAS 32 "Ijarah" [English].
    • AAOIFI FAS 31 "Investment Agency (Al-Wakala Bi Al-Istithmar)" [English].
    • AAOIFI FAS 30 "Impairment, Credit Losses and Onerous Commitments" [English].
    • AAOIFI FAS 28 "Murabaha and Other Deferred Payment Sales" [English]. FAS 28 [Arabic].
Auditing Standards for Islamic Financial Institutions (ASIFI)
    • AAOIFI ASIFI 6 "External Shari’ah Audit (Independent Assurance Engagement on an Islamic Financial Institution’s Compliance with Shari’ah Principles and Rules)" [English].
Governance standards for Islamic Financial Institutions (GSIFI) Ethics standards
    • AAOIFI "Code of Ethics for Islamic Finance Professionals" [English]
Sharia standards
    • AAOIFI "Shari’ah Standard No. 57 on Gold and its Trading" [English]. AAOIFI Sharia standard 57 [Arabic].
    • AAOIFI (November 2017) "Shari’ah Standards for Islamic Institutions-Full text" [English].
Guidance notes
    • AAOIFI "Auditing Guidance Note (AGN) No. 02 “Auditor’s Report” [English].
General Council for Islamic Banks and Financial Institutions (known as CIBAFI)  is a non-profit organisation based in Bahrain. Its role is to support Islamic financial institutions though activities and initiatives. CIBAFI was founded in 2001 by the Islamic Development Bank (IDB). CIBAFI is comparable to the British Bankers Association (BBA) in the United Kingdom.
The Islamic Financial Services Board (known as IFSB), is based in Malaysia and is an international standard setter for Islamic financial institutions. IFSB issues global prudential standards and guiding principals for the Islamic finance industry.
Published standards
    • IFSB-22 (December 2018) "Revised Standard on Disclosures to Promote Transparency and Market Discipline for Institutions Offering Islamic Financial Services (Banking Segment)"[English]. IFSB-22 [Arabic].
    • IFSB-21 (December 2018) "Core Principles for Islamic Finance Regulation (Islamic Capital Market Segment)" [English]. IFSB-21 [Arabic].
    • IFSB-20 (December 2018) "Key Elements in the Supervisory Review Process of Takâful/Retakâful Undertakings" [English]. IFSB-20 [Arabic].
    • IFSB-19 (April 2017) "Guiding Principles on Disclosure Requirements for Islamic Capital Market Products (Sukûk and Islamic Collective Investment Schemes)" [English]. IFSB-19 [Arabic].
    • IFSB-18 (April 2016) "Guiding Principles for Retakāful (Islamic Reinsurance)" [English]. IFSB-18 [Arabic].
    • IFSB-17 (April 2015) "Core Principles for Islamic Finance Regulation (Banking Segment)" [English]. IFSB-17 [Arabic].
    • IFSB-16 (March 2014) "Revised Guidance on Key Elements In The Supervisory Review Process of Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes)" [English]. IFSB-16 [Arabic]. IFSB-16 [French].
    • IFSB-15 (December 2013) "Revised Capital Adequacy Standard for Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Takāful) Institutions and Islamic Collective Investment Schemes)" [English]. IFSB-15 [Arabic].
    • IFSB-14 (December 2013) "Standard on Risk Management for Takāful (Islamic Insurance) Undertakings" [English]. IFSB-14 [Arabic].
    • IFSB-13 (March 2012) "Guiding Principles on Stress Testing for Institutions offering Islamic Financial Services" [English]. IFSB-13 [Arabic].
    • IFSB-12 (March 2012) "Guiding Principles on Liquidity Risk Management for Institutions offering Islamic Financial Services" [English]. IFSB-12 [Arabic]. IFSB-12 [French].
    • IFSB-11 (December 2010) "Standard on Solvency Requirements for Takâful (Islamic Insurance) Undertakings" [English]. IFSB-11 [Arabic].
    • IFSB-10 (December 2009) "Guiding Principles on Sharî`ah Governance Systems for Institutions offering Islamic Financial Services" [English]. IFSB-10 [Arabic]. IFSB-10 [French].
    • IFSB-9 (December 2009) "Guiding Principles on Conduct of Business for Institutions offering Islamic Financial Services" [English]. IFSB-9 [Arabic]. IFSB-9 [French].
    • IFSB-8 (December 2009) "Guiding Principles on Governance for Takâful (Islamic Insurance) Undertakings" [English]. IFSB-8 [Arabic].
    • IFSB-7 (January 2009) "Capital Adequacy Requirements for Sukûk, Securitisations and Real Estate Investment" [English]. IFSB-7 [Arabic].
    • IFSB-6 (December 2008) "Guiding Principles on Governance for Islamic Collective Investment Schemes" [English]. IFSB-6 [Arabic].
    • IFSB-5 (December 2007) "Guidance on Key Elements in the Supervisory Review Process of Institutions offering Islamic Financial Services (Excluding Islamic Insurance (Takâful) Institutions and Islamic Mutual" Funds) [English]. IFSB-5 [Arabic].
    • IFSB-4 (December 2007) "Disclosures to Promote Transparency and Market Discipline for Institutions offering Islamic Financial Services (Excluding Islamic Insurance (Takâful) Institutions and Islamic Mutual Funds)" [English]. IFSB-4 [Arabic].
    • IFSB-3 (December 2006) "Guiding Principles on Corporate Governance for Institutions offering only Islamic Financial Services (Excluding Islamic Insurance (Takâful) Institutions and Islamic Mutual Funds)" [English]. IFSB-3 [Arabic].
    • IFSB-2 (December 2005) "Capital Adequacy Standard for Institutions (other than Insurance Institutions) offering only Islamic Financial Services (IIFS)" [English]. IFSB-2 [Arabic].
    • IFSB-1 (December 2005) "Guiding Principles of Risk Management for Institutions (other than Insurance Institutions) offering only Islamic Financial Services (IIFS)" [English]. IFSB-1 [Arabic]. IFSB-1 [French].
Technical notes
    • TN-3 (December 2019) "Technical Note on Financial Inclusion and Islamic Finance" [English].
    • TN-2 (December 2016) "Technical Note on Stress Testing for Institutions Offering Islamic Financial Services (IIFS)" [English]. TN-2 [Arabic]. The user guide for TN-2 is available in English and in Arabic.
    • TN-1 (March 2008) "Technical Note on Issues in Strengthening Liquidity Management of Institutions Offering Islamic Financial Services: The Development of Islamic Money Markets" [English].
Guidance notes
    • GN-7 (December 2019) "Guidance Note on Sharî`ah-compliant Lender-Of-Last-Resort Facilities" [English]. GN-7 [Arabic].
    • GN-6 (April 2015) "Guidance Note on Quantitative Measures for Liquidity Risk Management in Institutions Offering Islamic Financial Services (Excluding Islamic Insurance (Takâful) Institutions and Islamic Collective Investment Schemes)" [English]. GN-6 [Arabic]. GN-6 [French].
    • GN-5 (March 2011) "Guidance Note on the Recognition of Ratings by external Credit Assessment Institutions (ECAIS) on Takâful and ReTakâful Undertakings" [English]. GN-5 [Arabic].
    • GN-4 (March 2011) "Guidance Note in Connection with the IFSB Capital Adequacy Standard: The Determination of Alpha in the Capital Adequacy Ratio for Institutions (other than Insurance Institutions) offering only Islamic Financial Services" [English]. GN-4 [Arabic].
    • GN-3 (December 2010) "Guidance Note on the Practice of Smoothing the Profits Payout to Investment Account Holders" [English]. GN-3 [Arabic].
    • GN-2 (December 2010) "Guidance Note in Connection with the Risk Management and Capital Adequacy Standards: Commodity Murâbahah Transactions" [English]. GN-2 [Arabic].
    • GN-1 (March 2008) "Guidance Note in Connection with the Capital Adequacy Standard: Recognition of Ratings by External Credit Assessment Institutions (ECAIs) on Sharî’ah-compliant Financial Instruments" [English]. GN-1 [Arabic].

The International Islamic Financial Market (known as IIFM) was founded in 2002 in Bahrain. IIFM is a non-profit corporate body that provides Sharia compliant standards for Islamic financial contracts. 

IIFM issues standards on: Liquidity management, hedging and trade. IIFM organizes seminars and workshops and publishes annual reports on Sukuk.

Some IIFM standards: 

The International Islamic Liquidity Management Corporation (known as IILM) is based in Malaysia and is an international organization that creates and issues Islamic instruments (such as IILM sukuk) to facilitate Islamic liquidity management. IILM was established in 2010 by the Islamic Corporation for the Development of the Private Sector (known as ICD) as well as several central banks and monetary authorities. 

The inaugural Sukuk issuance took place in 2013 and raised USD 490 million. This short term Sukuk (3 months) was rated A-1 by Standard & Poor’s.

The Islamic International Rating Agency (known as IIRA) was established in October 2002 and commenced operations in 2005. IIRA is based in Bahrain and is an institution that provides ratings to financial markets by assessing issues and issuers in accordance to Sharia principles. 

IIRA’s shareholders body include the Islamic Development Bank (IDB), the Islamic Corporation for the Development of the Private Sector (ICD), rating agencies, banks, insurance companies and other institutions. IIRA has partnerships with both the Malaysian Rating Agency Berhad (MARC) and the Pakistani JCR-VIS Credit Rating Agency.

The Islamic Research and Training Institute (known as IRTI), established in 1981, is a member of the Islamic Development Bank (known as IDB or IsDB). IRTI is one of the biggest research and training institutes in the world. IRTI publishes books and research and offers learning and training programs in Islamic finance. 

Related Terms: