A new report by the Islamic Finance Council UK (IFC), a not-for-profit promotional body and the Malaysia-based International Shari’ah Research Academy for Islamic Finance (ISRA), highlights the glaring gap in external Shari’ah audit practice. 

Shari’ah audit practices continue to remain an opaque area with varied practices. Recent very public challenges on the Shari’ah authenticity of certain Sukuk structures, exemplify the need to readdress the Shari’ah assurance, governance and certification process. The report highlights a set of considerations directed to Shari’ah scholars, financial institutions, Shari’ah consultancy firms, standard setting bodies and regulators. 

Few took notice outside certain coteries of specialist bankers and lawyers, but the launch of a 42 page master documentation for derivatives that comply with Muslim religious principles could have a far-reaching impact on the Islamic finance industry.

The International Islamic Financial Market (IIFM), a Bahrain-based Islamic capital markets body, and the International Swaps and Derivatives Association (ISDA) have for the past four years been working on standardised documentation for derivative instruments that comply with sharia, or Islamic law.