April 28, 2009

A top Islamic finance body said on Tuesday it wants to launch a global study on how far markets adhere to its benchmarks with a view to standardising products, reflecting industry efforts to remove a key barrier to growth.Islamic financial markets have struggled to agree on the use of some banking practices, due to different readings of the sharia. This can make it tough to sell products across borders but some say the diversity of opinion encourages innovation.The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will seek a mandate from its trustees to examine the degree of sharia financial products' compliance with its 40 standards, its secretary-general said.

"It is to correct if there is any deviation from the appropriate practice, to provide advice and to promote homogeneity and standardisation," Mohamad Nedal Alchaar said in an interview."The issue of standardisation is becoming more important to banks because they want to use the same products. When you standardise you reduce the cost of discovery and tools and instruments become the same across markets and that really helps credibility, ease of marketing, ease of spread."Bahrain-based AAOIFI sets accounting, auditing and governance standards for the $1 trillion Islamic finance industry and its views carry considerable weight within the industry.