UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Institutions Related to the Planning, Regulation, and Supervision of the International Islamic Finance Industry


The International Financial Services Board (IFSB) (Based in Kuala Lumpur, Malaysia)

The International Financial Services Board (IFSB) was established in 2002 with the purpose of acting as an association of central banks and monetary authorities and other institutions that are responsible for the regulation and supervision of the Islamic Finance Services Industry.

In this capacity, the IFSB serves as an international standard-setting organization that promotes and enhances the soundness and stability of the Islamic financial services industry by issuing global prudential standards and guiding principles for the industry, broadly defined to include banking, capital markets and insurance sectors. The IFSB also conducts research and coordinates initiatives on industry related issues, as well as organizes roundtables, seminars and conferences for regulators and industry stakeholders.

Published Standards

International Islamic Financial Market (IIFM) (Based in Bahrain)

IIFM is the global standardization body for the Islamic Capital & Money Market segment of the IFSI. Its primary focus lies in the standardization of Islamic products, documentation and related processes.

IIFM was founded with the collective efforts of Central Bank of Bahrain, Bank Indonesia, Central Bank of Sudan, Labuan Financial Services Authority (Malaysia), Ministry of Finance (Brunei Darussalam) and Islamic Development Bank (a multilateral institution based in Saudi Arabia).  Besides the founding members, IIFM is supported by its permanent members namely State Bank of Pakistan and Dubai International Financial Centre Authority (UAE). IIFM is further supported by a number of regional and international financial institutions as well as other market participants as its members.

The principle objective of the IIFM is to encourage self-regulation for the development and promotion of the Islamic Capital and Money Market segment. IIFM, in partnership with its member institutions, creates initiatives that include issuance and trading guidelines; best practice procedures; standardization of financial contracts leading to product innovation; market recommendations and infrastructure development. In particular, IIFM promotes the emergence and integration of Islamic financial market into mainstream global financial markets.

IIFM acts as a market body in the development and maintenance of uniformity, assisting with standards benchmarking for transparency and robustness of Islamic financial markets.

IIFM plays an active role in the establishment, development and enhancement of trading, settlement and related systems infrastructure and involves itself with several challenging issues of the Islamic financial market such as Islamic Hedging, Secondary Market Documentation and products i.e. possible Islamic Repo, Treasury Murabaha contract mechanisms and similar elements vital to a well developed and functional Islamic financial system.

The IIFM will create the financial instruments and maintain an active market for about 200 Islamic banks and financial institutions around the world.  The instruments will be endorsed by the IIFM’s Islamic Sharia’h Committee.

Sharia’h Advisory Panel


AAOFI or The Accounting and Auditing Organization for Islamic Financial Institutions   (Based in Bahrain)

The Accounting and Auding Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia’h standards for Islamic financial institutions and the industry.

Professional qualification programs (notably CIPA, the Shari’a Adviser and Auditor “CSAA”, and the corporate compliance program) are presented now by AAOIFI in its efforts to enhance the industry’s human resources base and governance structures.

AAOIFI was established in accordance with the Agreement of Association, which was signed by Islamic financial institutions on 1 Safar, 1410H corresponding to 26 February, 1990 in Algiers. Then, it was registered on 11 Ramadan 1411 corresponding to 27 March, 1991 in the State of Bahrain.

As an independent international organization, AAOIFI is supported by institutional members (200 members from 45 countries, so far) including central banks, Islamic financial institutions, and other participants from the international Islamic banking and finance industry, worldwide.

AAOIFI has gained assuring support for the implementation of its standards, which are now adopted in the Kingdom of Bahrain, Dubai International Financial Centre, Jordan, Lebanon, Qatar, Sudan and Syria. The relevant authorities in Australia, Indonesia, Malaysia, Pakistan, Kingdom of Saudi Arabia, and South Africa have issued guidelines that are based on AAOIFI’s standards and pronouncements.

Key Publications

Islamic Corporation for the Development of the Private Sector (ICD) (Based in Jeddah, Saudi Arabia)

‘The ICD is an independent international multilateral financial institution created for the development of its member countries through investment in the private sector and the provision of financial services to those private sector entities.  Its authorized capital is US $1 Billion and its paid up capital is US$500 million.  The structure of the subscribed capital is as follows: Islamic Development Bank – 50% member countries; 30% public financial institutions of member countries – 20%.

The ICD has the following objectives: (1) Identifying opportunities in the private sector that could function as engines of growth; (2) providing a wide range of Sharia’h compliant compatible financial products and services; and (3) expanding access to Islamic capital markets by private companies in the IDB member countries. In achieving these objectives, the ICD seeks to play a role in mobilizing funds for private sector investment as well as acting as a catalyst in privatization programs and restructuring of companies in member countries by providing advisory services to both public and private sectors and encouraging the development of Islamic capital markets according to Sharia’h principles.  The ICD’s core-business activity, the direct financing of projects or companies is accomplished through the provision of equity and term financing to commercially viable projects/companies for enterprise restructuring and modernization.  The ICD develops intermediary investment vehicles such as leasing companies and investment funds to reach the private sector in cooperation with similar multilateral and national financial institutions.’  (The Law and Practice of Islamic Banking and Finance by Dr. Nik Norzrul Thani; Mohamed Ridza Mohamed Abdullah; and Megat Hizaini Hassan.  (2003))

International Islamic Rating Agency (IIRA) (Based in Bahrain)

The IIRA was established as the first rating agency in the Islamic Finance Industry.  It was set up to support Sharia’h compatible banks and mutual funds including assisting their entrance into international markets.  The IIRA was established with an authorized share capital of USD 10 Million and a paid-up capital of USD 2 million.


  • To become the ultimate reference point for credit ratings in accordance with Sharia’h principles.


The mission of the Islamic International Rating Agency is to foster development of the financial markets in which it operates through provision of –

  • Ratings for Sovereigns;
  • Traditional bond/sukuk Ratings and Rating framework to permit rational pricing;
  • Shari’a Quality Ratings to reflect institutional compliance;
  • Investment quality and/or Issuer ratings;
  • Specialist, focused Corporate Governance Ratings;
  • A periodic summary bulletin of market activity and ratings;
  • Economic commentary from a credit and investment quality perspective;
  • Detailed rating reports to enhance the investment decision process;
  • Sector reports clarifying company status within industry groupings;
  • A record of actual and prospective money and capital market activity;
  • Analysis of financial institution counterparty risk for treasurers;
  • Seminars on the analytical principles employed by rating agencies.

The General Council for Islamic Banks and Financial Institutions (GCIBFI) (Based in Bahrain)

Founded in 2001 with the mission of working for the support of the Islamic Banking industry with a view to promoting it through the dissemination of appropriate information and accurate data, the objectives of the organization are as follows: (1) To provide information to the public regarding the concepts and rules governing Islamic banking and finance practices; (2) To enhance cooperation between members of the GCIBFI and other related institutions, such as regulatory bodies, in order to achieve common objectives; (3) To help the GCIBFI members face challenges and problems in a collective manner in order to pave the way for success; (4) To prepare and disseminate information pertinent to Islamic banking practices.’ (The Law and Practice of Islamic Banking and Finance by Dr. Nik Norzrul Thani; Mohamed Ridza Mohamed Abdullah; and Megat Hizaini Hassan.  (2003))

The Institute of Islamic Banking and Insurance (Based in London)

This institute was set up in 1991 in London with the purpose of providing education and training in Islamic Finance.

With members, students and other individuals and organizations that span the globe, the Institute brings together people of all faiths, and those with no faith, to create  the awareness of an alternative financial system that is true to the spirit which should mark every financial service.  Islamic banking and Islamic insurance follow the moral principles that are emphasized  in Islamic belief with attention to the human dimension of the economy.

The Aim of the Institute is to
Create a wider base of knowledge and understanding of the principles and methodologies of Islamic banking and Islamic insurance by delivering the highest quality of professional education, training and research relevant to the needs of the industry and raise awareness across all financial disciplines of the positive benefits of incorporating moral and ethical aspects in all dealings.

The Institute will achieve its aims through the following strategic objectives:
  • To develop, organize and promote for the public benefit, programs of education, training and research in Islamic finance, banking and Islamic insurance and related financial systems;
  • To develop, organize and conduct examinations and award qualifications, certificates, diplomas and other forms of professional accreditations;
  • To advance education and knowledge on the subject of Islamic finance, Islamic banking and Islamic insurance and to promote research for the public benefit in all aspects of the subject;
  • To act as an authoritative body for the purpose of consultation and research in matters of education, training, professional development, industry practice or public interest concerning Islamic finance, banking and insurance.

The Islamic Research and Training Institute (IRTI) (Based in Saudi Arabia)

The IRTI is the research and training arm of the Islamic Development Bank (IDB).  The purpose of the Institute is to conduct research in order to ensure that the economic, financial, and banking activities of the IDB in Muslim countries conform to Sharia’h and to extend training facilities to IDB personnel engaged in economic development activities in the Bank’s member countries.

Paper Published by the Institute ‘Contemporary Practices of Islamic Finance Techniques’

The Dow Jones Islamic Market Indexes

The Dow Jones Islamic Market Index family includes thousands of broad-market, blue-chip, fixed-income and strategy and thematic indexes that have passed rules-based screens for Shari´ah compliance. The indexes are the most visible and widely-used set of Shari´ah-compliant benchmarks in the world.

To determine their eligibility for the indexes, stocks are screened to ensure that they meet the standards set out in the published methodology. Companies must meet Shari´ah requirements for acceptable products, business activities, debt levels, and interest income and expenses. The screening methodology is subject to input from an independent Shari´ah supervisory board. By screening stocks for consistency with Shari´ah law, the indexes help to reduce research costs and compliance concerns Muslim investors would otherwise face in constructing Islamic investment portfolios.

In sum, the Dow Jones Islamic Market Indexes were created for people who desire to invest according to Islamic investment guidelines.  The indexes track Sharia’h compliant stocks from around the world and all securities selected for the Dow Jones Islamic Market Indexes are acceptable under Sharia’h law.  A Sharia’h Board of Scholars advises the Dow Jones on Sharia’h compliance to ensure acceptability under Sharia’h law.

1 Comment

  Farooq I.A. wrote @

Thanks for providing detailed information.My comments relate to IFSB-practical side.
Do they know about Competition Commission findings in Pakistan?
How IF is financing these sectors,one case to site is Sugar Industry?
Do they have guide lines for IF Monetary policy parameters, when Central Bank is pushing ‘Interst rate’ upward?
IMF and WB give direction to Monetary policies of Borrower economies.How do Central Banks save IF?
Farooq I.A.

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UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

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