Keynote Speech by the Secretary-General of the AAOIFI at the 12th IFSB Summit Gala Dinner, Almaty, Kazakhstan
Date posted: 21 May 2015
Date: 20 May 2015
Event / Venue: Keynote Speech by the Secretary-General of the AAOIFI at the 12th IFSB Summit Gala Dinner, Almaty, Kazakhstan
Speaker: Dr.Hamed Hassan Merah, Secretary-General, Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI)
Ladies and Gentlemen,
السلام عليكم ورحمة الله وبركاته
and a very good evening to all of you.
On behalf of the Accounting and Auditing Organisation for Islamic Financial Institutions, or AAOIFI in short, I would like to firstly congratulate the Islamic Financial Services Board, or IFSB, for organising this 12th edition of the IFSB Summit.
I would also like to personally thank His Excellency Mr. Jaseem Ahmed, the Secretary General of IFSB, and his team for helping to arrange my participation at this Summit, and for inviting me to speak this evening.
I would also like to express my gratitude and appreciation to the Government of the Republic of Kazakhstan, the National Bank of Kazahstan, and His Excellency Mr. Kairat Kelimbetov, the Governor of the National Bank of Kazakhstan, for cordially hosting us all here.
The leading thought leaders of Islamic finance have long championed the potential and opportunity for Islamic finance to create and support the New Silk Road – that is essentially to promote trade and investments along the regions of the Middle East, Central Asia, East Asia, and beyond.
It is therefore fitting that we are all gathered here in the Republic of Kazakhstan, and at the heart of the Silk Road.
In my speech this evening, I would like to draw from the experience of the old magical Silk Road, and offer some perspectives on lessons that can benefit Islamic finance today.
Indeed, there are some illuminating parallels between the old Silk Road and the modern Islamic finance.
For example, the establishment of the old Silk Road was primarily guided by the development of new products and the search for new markets. These same aspirations have also guided the continuing expansion and growth of the modern Islamic finance.
In addition, the old Silk Road was arguably a culmination of unprecedented collective efforts by all the different markets. Much in the same way, the on-going evolution of modern Islamic finance has been led by the global interaction of markets across different regions of the world.
Ladies and Gentlemen,
Historians throughout the ages have highlighted a range of factors that contributed towards the success of the old Silk Road in promoting the flow of trade, cultures and ideas.
There are invaluable lessons that can be learnt from the great experience of the old Silk Road especially in terms of economic relationships, societal developments and political will.
This evening, I would like to take this opportunity to offer some perspectives on the major lessons that can benefit Islamic finance, and that can especially help AAOIFI in our roles as a standard-setter and an industry infrastructure agency for the international Islamic finance industry.
And I will focus on three major lessons; the first of which is, that it is important to make sure products are of high quality, and are safe.
As we all know, the old Silk Road was a network of trade routes that existed not solely for the purpose of trading in silk, but also for a range of commodities and products.
A key contributing factor to the success of the trading network was the steady supply of safe and high-quality products. And silk was a great example.
Given that silk was a relatively new product at that time, the silk producers had especially gone to great length to make sure that their products were very safe and high-quality.
This is a very simple lesson, but it is an extremely important one for AAOIFI in our work as a standard- setter for Islamic finance.
AAOIFI must continue to make sure that the standards that we issue can support the development of safe and high-quality Islamic finance products and services.
This lesson has particular significance to our Sharī`ah standards. In Islamic finance, an important aspect for safe and high-quality products and services is the proper incorporation of Sharī`ah-compliant features.
AAOIFI Sharī`ah standards are an important tool for product development as they have the capacity to ensure full Sharī`ah compliance and to reduce product development costs.
Ladies and Gentlemen,
The second lesson from the old Silk Road is the importance of protection of the trading routes network.
A critical success factor for the old Silk Road was the massive investments by communities along the land as well as the maritime trading routes, to provide a safe passage for the flow of trade.
These investments included building of forts and defensive walls along the trading routes. In addition to physical infrastructures, administrative units and security forces were also established by the different communities to contribute towards the overall protection of the routes.
Indeed, one may say that these collective efforts in protecting the routes were the equivalent of “building an enabling environment” for growth of trade.
And this presents an invaluable lesson for AAOIFI – that we must continue to ensure that our standards are dynamic in enabling the growth of Islamic finance, that our standards are also robust in protecting the integrity of Islamic finance, and that our standards should form an integral part of the regulatory framework to safeguard the international Islamic finance industry.
We have to bear all these in mind when we develop new standards for the industry. It is also extremely critical that these considerations should guide us in reviewing all our existing standards on Sharī`ah, accounting, auditing, ethics and governance.
Which brings me to the third and last lesson that I would like to cover this evening – in that the old Silk Road highlighted the indispensable necessity of global collaboration.
It has been argued that under the strong integrating dynamics on the one hand, and the impact of change it transmitted on the other, the old Silk Road had successfully encouraged communities to collaborate towards mutual opportunities, and to gain from the mutual benefits.
And therein lies the most critical lesson for AAOIFI.
In carrying out our work on standards development and revision, and our standards-related activities, AAOIFI must effectively engage and consult our institutional members, central banks and regulatory authorities, Islamic financial institutions, the esteemed Sharī`ah scholars, the accounting and auditing professions, the Sharī`ah compliance professions, and all other stakeholders of the Islamic finance industry across the world.
AAOIFI must also strengthen collaboration with other Islamic finance standards-setting and industry infrastructure development bodies such as IFSB, International Islamic Financial Market (IIFM), International Islamic Liquidity Management Corporation (IILM), and General Council for Islamic Banks and Financial Institutions (CIBAFI).
We are also strengthening our collaboration and cooperation with multilateral and international institutions such the Islamic Development Bank Group, the World Bank, the International Monetary Fund, and the International Accounting Standards Board.
The global collaboration in standards-setting efforts must also be accompanied by similarly global collaboration in driving adoption and implementation of the standards.
Ladies and Gentlemen,
Before I end my speech this evening, please allow me to give a brief updates on AAOIFI and our activities.
AAOIFI has now issued a total of 94 standards for the international Islamic finance industry, covering almost the full range of the globally-accepted Islamic finance products and services.
The standards consist of:
- 54 Sharī`ah standards, prescribing the Sharī`ah requirement that has to be followed in developing the specific Islamic financial products and services;
- 26 accounting standards, which give guidance on the presentation of financial accounts for Islamic financial institutions as well as accounting treatment on specific Islamic finance products;
- 5 auditing standards, which give guidance on auditing of Islamic financial institutions;
- 7 governance standards, which focus on the Sharī`ah compliance and supervision for Islamic financial institutions; and
- 2 codes of ethics, for employees as well as accountants and auditors of Islamic financial institutions.
Our standards development program over the next few years include formulation of a number of new standards, and continuous review of existing ones so as to ensure that the standards reflect the market conditions and remain relevant to the industry.
For our standards development program, and all our other activities, we have been fortunate to have received the support of our institutional members. There are now over 200 institutional members from over 45 countries.
We are also particularly fortunate to have had the very strong support from central banks and regulatory authorities across the major Islamic finance jurisdictions in adopting our standards.
Over the next few months, we will also be carrying out some work to fine-tune our strategies and operations.
As I mentioned earlier, in carrying out our work on the standards development and review, and in fine-tuning our strategies and operations, we will continue to engage and consult the international Islamic finance industry.
We will also continue to learn and bear in mind the lessons as well as challenges from the old Silk Road.
We are committed to support the growth and expansion of international Islamic finance industry, and to support the aspirations of the industry to realise the potential and opportunity of the New Silk Road.
With that, I would like to thank His Excellency Mr. Jaseem Ahmed and the IFSB again for inviting me to be here; I would also like to thank again His Excellency Mr. Kairat Kelimbetov and the National Bank of Kazakhstan for hosting us all here.
And I would like to thank all of you for your time and attention.
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