The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), a standards setting body for the Islamic finance industry held its annual conference in Bahrain recently. In an article describing the conference, there was as much focus on the topics covered as the number of attendees, which did not decline from last year despite "worries by the recent unrest in the kingdom, according to AAOIFI deputy general secretary Khairul Nizam".
What has not been mentioned, but is striking for an industry body that is very influential in shaping the standards under which the Islamic finance industry operates, is the lack of availability of details of the conference discussions, beyond the list of topics covered. Even here, the topics were listed in English, but the bullet points were all in Arabic. This is understandable for a conference taking place in an Arabic-speaking country; however, it is not understandable for an organization which has influence over an industry with a global scope whose working language is English.
Even less understandable is why the standards issued by AAOIFI have not been made publicly available on the organization's website (in contrast, the Islamic Financial Services Board (IFSB), does make its standards freely downloadable on their website). The explanation I have heard for why AAOIFI does not put its standards on its website is that selling the books containing the standards is a key revenue source for the organization. This is unacceptable in a globalized world where internet access is ubiquitous and transparency is lauded.
Without making the standards publicly available except to those who purchase the hard copy, there will be far less public scrutiny and understanding about what AAOIFI standards cover and what they do not, and in particular, public discussion (even within the industry) about how they can be improved. AAOIFI was initially an accounting and auditing standards body, so most of its standards would not have been significant to those not directly involved within the industry. However, AAOIFI has expanded its remit into areas of corporate governance, codes of ethics and Shari'ah standards, which are areas of concern to people who are not Islamic finance practitioners.
For example, how is an investor in a publicly-traded Islamic bank supposed to compare different institutions based on their public reporting of governance, ethics and Shari'ah standards if they cannot look at the source document for the standards those institutions are supposed be following? The Shari'ah board is a natural (but not flawless) check for the Shari'ah standards, but in other areas there are gaps where the standards themselves are not well known and AAOIFI does not have enforcement powers over its members.
This is untenable when Islamic finance expands across borders. AAOIFI members are in many countries and the local regulators are responsible for most of the regulation, but there are global standards being developed that are not publicly available for investors in these institutions to have easy access to. The investors are likely to provide some form of supervision if the regulators fall short, which has been the case in many developed countries in finance recently. There may be some capable regulators in some emerging and frontier markets, but when there are such serious lapses in developed countries regulatory systems, it makes no sense to reduce the ability of investors to police Islamic financial institutions by making it more difficult to see the standards under which they are supposed to be operating.
It may be an uphill battle to convince AAOIFI to put its standards on its website in PDF format (they can still sell hard copies and it is likely that many Islamic financial institutions will buy them). However, it would be a start for AAOIFI to put much more detail about the recent conference on its website, whether that is the presentations made, transcripts of speeches or video of the conference in its entirety for the YouTube generation of Islamic financial market participants.
UPDATE (6/2): When contacted by email, Khairul Nizam, the Deputy Secretary General of AAOIFI said they are working on putting the slides and papers from the conference on their website and they would be up "in the next week or so".