Building trust in Islamic finance instruments, especially those that are publicly offered, requires a robust foundation. While conventional finance focuses on creditworthiness, Islamic finance highlights Shari’ah compliance and safeguarding underlying assets.
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) Governance Standard guides rating agencies in assessing Shari’ah compliance and fiduciary ratings for instruments like Sukuk. These assessments include Shari’ah compliance, governance, transparency, and fiduciary performance.
For Islamic instruments, adherence to Shari’ah principles and rules is paramount. Sukuk, for example, must channel funds responsibly, serve permissible purposes, and uphold transparency.
Unlike conventional transactions rooted in debt, Islamic finance generates returns from underlying assets, introducing distinct risks.
The AAOIFI Standard encompasses Sukuk, Unrestricted Investment Accounts, and other Islamic finance instruments. It sets ethical and compliance requirements for rating agencies, ensuring a solid rating framework.
While a suggested rating scale exists, rating agencies are urged to tailor parameters in line with Shari’ah principles, facilitating a more informed investment landscape.