Islamic Banking Strategic Overview & Introduction To To AAOIFI

Islamic Banking Strategic
Overview &
Introduction to to AAOIFI
Presentation Outline
Strategic Objective of Islamic banking
AAOIFI – Vision & Mission
Overview – AAOIFI
AAOIFI Objectives
Applications of AAOIFI Standards
Shariah Board Overview

*
Strategic Objectives for Islamic Banking
• Equitable Distribution & Circulation of Wealth in the society to promote Socio-Economic

justice keeping in view the superior objectives of Shariah
• Avoid all Impermissible transactions
Riba (Riba Al Nase’ah / Riba Al Fadhl)

Maysir / Gambling
Gharar
Uqood-e-Fasida
• Promote participation/profit sharing based & asset Backed Financing and discourage
artificial economic transactions
• Fulfilling halal Customer Needs
• Ensuring Shariah Compliance in all transactions

Basic Permissibility &
Prohibition:
A solid foundation for a
stable economic system
Guidelines for Commercial Dealings
Allah (SWT) has ordained in Holy Quran
“Allah has permitted trade and prohibited Riba”

Prohibition in Commercial Dealings
1. All type of Riba

 Riba Al Nase’ah
 Riba Al Fadl
2. Maysir / Gambling
3. Gharar (transaction with uncertainty)

Bai Qablal Qubz, Short sale, Future sale, Bai Dain /Sale of
debt,sale of artificial instruments like derivatives/options etc
Thus, Islamic banking system has a clear mandate to promote real

economic activity by refraining from all prohibited transactions
What distinguishes Islamic banking from
conventional banking?
Distinguishing Features
We find the differences are on three levels:
1. Conceptual & Socio-religious level

- Islamic banks are not money lenders
- cannot deal in interest & non permissible industries/goods.
- Decision making has to be ethical and abide moral values
2. Business model & Governing framework

- IB actively participates in trade and production process
- Governing framework in terms of Shariah Advisor &/or SSB

Distinguishing Features
3. Product Level Implementation
- usually asset backed & involve trading/renting of asset &

participation on profit & loss basis
- Implementation is not just a mere change of paper work and

terms but it involves
- having the right intention,
- the correct sequence of steps and timing of execution
If we are- clarity
able toof roles of contracting
understand parties and get our product
these difference
development in line with Objectives to IB, it would result in the socio
economic justice and focus on real economic transaction
Framework for Socio & Economic Accountability
To ensure Islamic banks are focus towards their objective

and are creating real economic value & efficiency for the
society we need a strong Framework.
Four Components of the Framework
Regulatory Guidelines, Supervision & Support
Corporate Shariah Governance

Transparent/Enhanced Accounting
& Reporting Regime
Shariah Compliance Audit
Global Bodies for Islamic banking
AAOIFI
IFSB
IIRA
CIBAFI
AAOIFI
Accounting & Auditing Organization of
Islamic Financial Institutions
An Umbrella organization for Islamic banking

About AAOIFI
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AAOIFI – Vision & Mission
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About AAOIFI
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Progress of AAOIFI So Far
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AAOIFI Organizational Structure
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Objectives of AAOIFI
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Certifications from AAOIFI
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How AAOIFI Supports the Global IFI
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How AAOIFI Supports the Global IFI
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AAOIFI – Shariah Board
Name Position Nationality
Sh. Muhammad Taqi Usmani State Bank of Pakistan Sharia Board Chairman, Vice-President Darul-Uloom Karachi, Pakistan Pakistan
Sh. Abdulla al Manea’ Member, Council of Senior Scholars, and Advisor to the Royal Court, Saudi Arabia Saudi
Dr. Abdul Sattar Abu Ghuddah President and General Secretary of the Unified Shari’ah Board of Al Baraka Banking Group Syrian / Bahraini
Prof. Dr. Hussain Hamed Hassan International Expert and Advisor, Chairman and Member of IFIs’ Shari’ah Supervisory Boards Egyptian
Prof. Dr. Abdullah bin Mohammad Al
Member, Council of Senior Scholars, and Advisor to the Royal Court, Saudi Arabia Saudi
Mutlaq
Dr. Nizam Mohammad Al Yakubi International Expert and Advisor, Chairman and Member of IFIs’ Shari’ah Supervisory Boards Bahraini
Prof. Dr. Yousif Abdullah Al Shubaili International Expert and Advisor, Chairman and Member of IFIs’ Shari’ah Supervisory Boards Saudi
Dr. Essam Khalaf Al Enezi Chairman and Member of IFIs’ Shari’ah Supervisory Boards Kuwaiti
Dr. Aflah Al Khalili Muftis Council in Oman Omani
Dr. Abdul Rahman Al Atram International Expert and Advisor, Chairman and Member of IFIs’ Shari’ah Supervisory Boards Saudi
Prof. Dr. Nazih Hammad Chairman of Citi Islamic Bank Sharia Board Canadian
Dr. Qais Al Shaikh Mubarak Member, Council of Senior Scholars, Saudi Saudi
Prof. Dr. Mohammad Othman Shubair Prof. in University of Jordan Jordanian
Dr. Albashir Mohammad Ezz el-Din Al
Vice Chairman, Central Bank of Libya Sharia Board Libyan
Gheryani
Dr. Aznan Hasan Vice Chairman of Securities Commission Sharia Board, Malaysia Malaysian
Dr. Osaid Muhammad Adeeb Kailani Head of Shari’ah at Abu Dhabi Islamic Bank, UAE Syrian
Dr. Ibrahim Ahmed Al shaikh Al Darir Member, Central Bank of Sudan Sharia Board Sudanese
Dr. Mohammad Sahri Member, Highest Shari’a Council, Morocco Moroccan
Mr. Elhadi Elnahaoui Islamic Development Bank Mauritania
Dr. Hamed Hassan Merah Sharia Board Rapporteur and Secretariat
AAOIFI Shariah Standards Board
•Shariah
Shariah Board
Board is
is composed
composed of
of twenty
twenty members
members
•Appointed
Appointed by
by the
the Board
Board of
of Trustees
Trustees for
for aa four-year
four-year
term
term
•Among
Among fiqh
fiqh scholars
scholars who
who represent
represent Shariah
Shariah
supervisory
supervisory boards
boards
•Upto
Upto 12
12 members
members of
of who
who also
also serves
serves on
on Shariah
Shariah *
Role - AAOIFI Shariah Standards Board
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Role - AAOIFI Shariah Standards Board
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AAOIFI Accounting & Auditing Standards Board
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AAOIFI Accounting & Auditing Standards Board
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Adoption of AAOIFI Standards
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Benefits of AAOIFI
Standardization is necessary to ensure that all the matters of Islamic
financial institutions are dealt with, within a framework which is
acceptable for all Muslims.
 Standardization of Shariah Compliance Regulations for Islamic Finance
 Improved governance and Shariah Compliance Assurance for Islamic Financial

Institutions
 Guidelines & Standardization of Islamic Financial Products used by Islamic
Financial Institutions
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Islamic Banking Strategic

Strategic Objective of Islamic banking

AAOIFI – Vision & Mission

Applications of AAOIFI Standards

Shariah Board Overview

• Equitable Distribution & Circulation of Wealth in the society to promote Socio-Economic

• Avoid all Impermissible transactions

Riba (Riba Al Nase’ah / Riba Al Fadhl)

• Fulfilling halal Customer Needs

• Ensuring Shariah Compliance in all transactions

Allah (SWT) has ordained in Holy Quran

“Allah has permitted trade and prohibited Riba”

1. All type of Riba

3. Gharar (transaction with uncertainty)

Thus, Islamic banking system has a clear mandate to promote real

We find the differences are on three levels:

1. Conceptual & Socio-religious level

- cannot deal in interest & non permissible industries/goods.

- Decision making has to be ethical and abide moral values

2. Business model & Governing framework

- Governing framework in terms of Shariah Advisor &/or SSB

3. Product Level Implementation

- usually asset backed & involve trading/renting of asset &

- Implementation is not just a mere change of paper work and

- having the right intention,

- the correct sequence of steps and timing of execution

To ensure Islamic banks are focus towards their objective

Regulatory Guidelines, Supervision & Support

Corporate Shariah Governance

An Umbrella organization for Islamic banking

 Improved governance and Shariah Compliance Assurance for Islamic Financial

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