New benchmarks and enhanced protections for Islamic investment accounts are set to bolster the global Sharia-compliant finance industry following key approvals by a top-tier Bahrain-based standard-setting body.
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Governance and Ethics Board (AGEB) has approved, in principle, a comprehensive new standard aimed at unifying how investment accounts are managed globally.
The move, finalised during the board’s 43rd meeting, introduces Governance Standard (GS) 24: ‘Governance and Management of Investment Accounts.’ The framework is designed to safeguard stakeholder interests and ensure that profit and loss attributions strictly align with Sharia requirements.
According to AAOIFI, GS 24 addresses a critical need for consistent control requirements across different jurisdictions. By unifying these rules, the standard aims to mitigate “reputation risk” for the Islamic finance sector.
AGEB chairman Farrukh Raza described the standard as a “much-needed” intervention.
“I believe that GS 24 unifies governance and control requirements across jurisdictions, thereby contributing to the mitigation of reputation risk for the Islamic finance industry,” Mr Raza said.
The board reviewed extensive feedback from industry stakeholders before instructing the secretariat to proceed with the final issuance.
In a secondary major development, the board also approved the reissuance of an exposure draft regarding Sharia-compliant benchmark rates.
The project aims to move away from conventional interest-based benchmarks by offering two distinct illustrative models for industry consideration. The first model is built upon macro-level economic indicators to provide a broader data-driven foundation, while the second focuses specifically on Islamic financial market data, outlining the structure and computation mechanisms derived directly from Islamic sector performance.
AAOIFI secretary-general Omar Mustafa Ansari noted that the standards have undergone rigorous vetting, including multiple public hearings in both English and Arabic.
“This reflects our commitment to developing high-quality standards that incorporate industry insights and uphold the highest levels of Sharia compliance,” Mr Ansari added.
The organisation confirmed that dates for upcoming public hearings on the benchmark rate models will be announced on the AAOIFI website shortly.
&uuid=(email))