WHY ISLAMIC FINANCE TRAINING NEEDS TO CONFORM TO AAOIFI STANDARDS
© Ethica Institute of Islamic Finance
Without standardized training and certification, the Islamic finance industry will continue to calcify in its old ways: no serious innovation
into equity-based Musharakah and Mudarabah products; no practical alternative to a fractional debt-reserve banking system; no global gold-based currency; and no move away from debt-based mainstays.
Instead, what we need in order to rebuild Islamic finance is a strong foundation of capable, trained individuals competent enough to innovate products away from debt-based, fiat-based, cosmetically- enhanced conventional products for the rich and upper middle class to equity-based, asset-based, genuine products for all.
Yet, we continue to sing the praises of Islamic bankers at awards ceremonies, hymn the “growth” mantra of conventional economics, and hope for the best. Somehow, someone, we believe, will one day make it all right. After all, Islamic finance is just starting out and it only needs a little more time to work out the details, no?
Wrong. Where we are presently headed is an unabashed embrace of conventional banking served up with a milquetoast nod to the Shariah. If we go on without standardized training, nothing changes and we continue as before. We lend further credence to detractors who believe that Islamic finance is not working and what is needed is a complete revamp.
But because these same detractors leave much to be desired in the way of a practical, scholar-approved blueprint for us to follow, what the absence of a workable alternative will more likely lead to is countless millions with a worse option (interest-based products) rather than a merely bad one (poorly implemented Islamic finance).
What we need is a move away from the current state of “anything goes” Islamic finance training and certification. What we need is standardized training and certification based on AAOIFI Shariah Standards. AAOIFI, (pronounced “a-yo-fee”), is the Accounting and Auditing Organization for Islamic Financial Institutions and the de facto in over 90% of the world’s Islamic finance jurisdictions. AAOIFI already brings together scholars from all over the world who agree on Shariah standards and have put behind us the painstaking task of harmonizing global standards.
According to the Institute of Management Accountants, AAOIFI standards are now mandatory in Bahrain, the Dubai International Financial Centre, Jordan, Qatar, Qatar Financial Centre, Sudan, South Africa, Syria, and the Islamic Development Bank. AAOIFI standards also form the basis for national standards in Bangladesh, Brunei, France, Indonesia, Kuwait, Lebanon, Malaysia, Pakistan, Russian and Central States, Saudi Arabia, the United Arab Emirates, and the United Kingdom.
AAOIFI’s regularly updated texts have become the definitive reference work for those seeking a comprehensive rule book about Islamic financial products and practices. Its 85 standards cover everything from accounting and auditing to governance and product- specific Shariah standards. The 16 to 20 scholars – the number depending on the year – who sit on AAOIFI’s Shariah Board are leading Islamic finance scholars who come from the Gulf, South Asia, South East Asia, Africa, and North America; each of them legally qualified to issue a fatwa and adjudicate on matters Islamic finance.
If we are going to be serious about Islamic finance, we need to be serious about Islamic finance training. And being serious about training means being careful about what is being said. A scholar once advised his student, “Find the best teacher and become the best student.” The best “teacher” the Islamic finance industry presently has is AAOIFI. Are we as “students” equal to the task?
