Part 3 of 5: Fiqh or Fiction — Standardized AAOIFI Based Training Promotes Shariah Harmonization

Click here to see Part 1 of 5: Fiqh or Fiction — The Need for Standardized Training

Click here to see Part 2 of 5: Fiqh or Fiction — What Does Standardized and Accredited Training Mean in Islamic Finance?

Standardized AAOIFI Based Training Promotes Shariah Harmonization

In 1991, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI, pronounced “a-yo-fee”) formed as an independent, non-profit, standard-setting body with a remit to promulgate Islamic finance standards for the entire industry. Nearly thirty years on, AAOIFI is now widely regarded by banks and governments as the de facto industry standard for Islamic finance practitioners. In fact, numerous central banks and financial services authorities now recommend the standards as a source of guidance for local banks.

AAOIFI’s regularly updated texts have become the definitive reference work for those seeking a comprehensive rule book about Islamic financial products and practices. Its 100 standards cover everything from accounting and auditing to governance and product-specific Shariah standards. The 16 to 20 scholars — the number depending on the year — who sit on AAOIFI’s Shariah Board are leading Islamic finance scholars who come from the Gulf, South Asia, South East Asia, Africa, and North America; each of them legally qualified to issue a fatwa and adjudicate on matters Islamic finance. And for a religion that deeply values scholarly consensus, or ijma, as one of the main sources for legal derivation in Islamic jurisprudence, it is a relief to hear one scholar put it this way: “AAOIFI is the closest thing we have to ijma in Islamic finance.”

Training Accreditation by Scholars, Not Academic and Professional Bodies

According to AAOIFI’s “Stipulation and Ethics of Fatwa in the Institutional Framework” the standards for issuing a fatwa are, at minimum, knowledge of:

1. Islamic jurisprudence in financial transactions
2. How to derive rulings from primary sources
3. Islamic jurisprudential contributions of other scholars
4. Contemporary issues in the financial industry

Moreover, the individual should demonstrate discernment, scrupulousness, and peer-reviewed competence within the financial industry.

In order to fully comprehend the complexity of the scholar’s task, one should reflect upon the competing demands placed upon him when deriving a ruling from the Quran and hadith (prophetic traditions) corpus; hadith which number in the tens of thousands for those that are rigorously authenticated (sahih) and exceed one million when counted as separate chains of transmission.

As one scholar notes, knowledge of the primary texts consists in knowing, among many other things, “the ‘amm, a text of general applicability to many legal rulings, and its opposite; the khass, that which is applicable to only one ruling or type of ruling; the mujmal, that which requires other texts to be fully understood, and its opposite; the mubayyan, that which is plain without other texts; the mutlaq, that which is applicable without restriction, and its opposite; the muqayyad, that which has restrictions given in other texts; the nasikh, that which supersedes previous revealed rulings, and its opposite; the mansukh: that which is superseded; the nass: that which unequivocally decides a particular legal question, and its opposite; the dhahir: that which can bear more than one interpretation.”

This lengthy description of the minutiae facing the scholar in only one area of ijtihad, or personal legal reasoning, is particularly relevant in an age when pretenders to the task open the doors of scholarship unto themselves. Lest one decry that such high standards only complicate matters, and that God’s word is divinely protected, we should have the humility to remind ourselves that divine protection relates to the word of God, not to our ability to derive rulings from it.

It is not lost on anyone the rareness of such individuals in present times. In a perfect world, such a scholar would be the trainer himself. But until there are enough scholars to go around, the best that we can do, and the least we must, is obtain their consent when accrediting a training program.

“Fatwa Shopping” and the Harms of Less Than 100% Standardization

When training content is anything less than 100% standardized to AAOIFI, discrepancies between the learner’s knowledge and the market’s practice abound. This rift widens into a chasm of confusion and leads to what can only be euphemistically described as the banker’s penchant for “fatwa shopping”: finding the right fatwa to fit your needs, rather than tempering your needs to comply with the fatwa. At best, this occasionally costs some banks and customers their money. At worst, this laxity costs the whole industry its credibility.

A number of Islamic finance trainers now work with guidebooks and other material that is merely “authored” by a scholar or “supervised” by a scholar. But what we often end up with is material that is 80% or 90% AAOIFI-based; “Shariah compliant” according to somebody, perhaps. But not uniformly Shariah-compliant according to any particular mainstream collectivity.

When trainers fail to conform their content 100% against a widely accepted standard, newcomers get confused: “Why is this guidebook telling me a product is unacceptable to most of the industry, but teaching it to me anyway?” It is not always quite clear where the Shariah-compliant part of the guidebook ends and where the non-compliant part begins. What is a newcomer in Islamic finance supposed to do?

Click here to see Part 1 of 5: Fiqh or Fiction — The Need for Standardized Training

Click here to see Part 2 of 5: Fiqh or Fiction — What Does Standardized and Accredited Training Mean in Islamic Finance?

Part 4 of 5: Fiqh or Fiction — Addressing Common Questions

Part 5 of 5: Fiqh or Fiction — Next Steps

Approved by Ethica’s Shariah Board. For the original article with footnotes, visit www.EthicaInstitute.com.

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