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Framework and Infrastructure for Islamic Financial System

This session discusses the establishment of a solid legal framework for Islamic banking and finance, focusing on upholding the principles of Shari'a, effectiveness, sustainability, and resilience in both Islamic and conventional systems. It also explores additional considerations for Islamic finance and the strengthening of the link between Islamic finance and the real economy.

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Framework and Infrastructure for Islamic Financial System

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  1. Dr. Khaled Al Fakih Secretary General & CEO Accounting and Auditing Organization for Islamic Financial Institutions Session I: Establishing a Solid and Supportive Legal Framework for Islamic Banking and Finance Oman Second Islamic Banking & Finance Conference

  2. Oman 2nd Islamic Banking & Finance Conference Muscat, Sultanate of Oman 17 March 2013

  3. Framework and infrastructure for Islamic financial system

  4. Framework and infrastructure for Islamic financial system Additional considerations for Islamic finance Overall objectives * • Uphold principles of Shari’a • Effectiveness • Sustainability • Resilience * For both Islamic and conventional systems.

  5. Framework and infrastructure for Islamic financial system Additional considerations for Islamic finance Overall objectives * • Uphold principles of Shari’a • Effectiveness • Capture structure and essence of Islamic finance transactions in financial reporting and accounting • Sustainability • Resilience * For both Islamic and conventional systems.

  6. Framework and infrastructure for Islamic financial system Additional considerations for Islamic finance Overall objectives * • Uphold principles of Shari’a • Effectiveness • Capture structure and essence of Islamic finance transactions in financial reporting and accounting • Sustainability • Resilience • Strengthen the link between Islamic finance and real economy * For both Islamic and conventional systems.

  7. Strengthen the link between Islamic finance and real economy • Recommendations, amongst others, for policies on financing and investment schemes relating to: • Provisioning of health and medical services, • Development of research and education facilities, • Development of SME etc, • Promotion of economic growth potential, • Development of basic infrastructure, • Alleviation of social and economic disadvantages. AAOIFI Governance Standard on Corporate Social Responsibility

  8. Brief update on AAOIFI standards

  9. AAOIFI Standards • Total of 88 standards issued: • 48 Shari’a standards. • 26 accounting standards. • 5 auditing standards. • 7 governance standards. • 2 codes of ethics. • In addition, new standards are being developed and existing standards reviewed.

  10. Shari’a Standards • New Shari’a standards (issued in 2012) on: • Financial rights and disposal of those rights; • Bankruptcy; • Liquidity management relating to sources and uses of liquidity; • Capital and investment protection; • Investment Agency; • Rules on bases of determination and calculation of profit from investment instruments; • “Amanah” options, covering rights relating to options for termination of legal contracts due to bad faith. Development of new standards and review of existing standards.

  11. Accounting Standards • New accounting standard (issued in 2012) on: • Investments in real estate. • Review of existing accounting standards on: • Equity on investment accountholders (2 standards). • Takaful (4 standards). • Murabaha. • Ijarah. • Development of new accounting standard on: • Issuance of Sukuk. • Certified Shari’a Adviser and Auditor (CSAA) • Certified Islamic Professional Accountant (CIPA) • Compliance certification for financial contracts and software solution. Standards-related programs

  12. Thank You www.aaoifi.com

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