Sharia standards of AAOIFI: a guideline for Islamic finance

The foundation of Islamic financing lies not only in ethical principles but also in strict standards that regulate how financial transactions should be structured in accordance with Sharia norms.

The foundation of Islamic financing lies not only in ethical principles but also in strict standards that regulate how financial transactions should be structured in accordance with Sharia norms. At the international level, the main role in developing such standards is played by the AAOIFI — Accounting and Auditing Organization for Islamic Financial Institutions. 

Founded in 1991, AAOIFI is based in Bahrain and is recognized in many countries as an authoritative source of Sharia standardization in the global Islamic finance industry. Its Sharia standards serve as the foundation for creating fair and transparent financial products, whether it be Murabaha, Ijara, Musharaka, or Sukuk.

Why are Sharia standards necessary?

The Islamic economy is based on principles outlined in the Quran and Sunnah. However, to apply them in modern financial systems, clear rules are necessary to ensure that:

- all transactions and agreements comply with Sharia principles;

- eliminate ambiguities and interpretational differences;

- create trust among clients and investors;

- enhance professionalism and standardize the market.

Sharia standards of AAOIFI help financial institutions properly structure products, assess risks, formalize contracts, and interact with clients. They cover dozens of areas: trade, leasing, investments, charity (including zakat and waqf), management of Islamic funds, etc.

Features of AAOIFI standards:

- Uniformity. These are official recommendations that help standardize Islamic financial practices worldwide — from the Gulf countries to Southeast Asia and Central Asia.

- Practicality. AAOIFI standards are not just theoretical — they are adapted to the realities of the modern market and business environment.

- Relevance. The organization regularly updates its documents, taking into account economic changes and the new needs of financial institutions.

- Support from Sharia scholars. Leading Islamic jurists and specialists in the fields of fiqh and finance work on the standards. Each document undergoes Sharia scrutiny and collective approval.

When a financial organization operates within the AAOIFI standards, it means:

- compliance with Islamic norms at all stages of the transaction;

- the presence of a Sharia board overseeing the activities;

- transparent reporting and internal auditing of transactions;

- adherence to the rights of both parties — the client and the financing party.

Thus, AAOIFI plays a key role in the development of Islamic financing, providing a foundation for a sustainable, transparent, and ethical financial system.