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allocations. The methods shall be mutually agreed between the IIFS and the Muḍārib and/or
Mushārakah partners.
Principle 3.3: IIFS shall define and establish the exit strategies in respect of their equity
investment activities, including extension and redemption conditions for Muḍārabah and
Mushārakah investments, subject to the approval of the institution’s Sharī`ah Board.
4. Market Risk
Principle 4.1: IIFS shall have in place an appropriate framework for market risk management
(including reporting) in respect of all assets held, including those that do not have a ready
market and/or are exposed to high price volatility.
5. Liquidity Risk
Principle 5.1: IIFS shall have in place a liquidity management framework (including reporting)
taking into account separately and on an overall basis their liquidity exposures in respect of
each category of current accounts, unrestricted and restricted investment accounts.
Principle 5.2: IIFS shall assume liquidity risk commensurate with their ability to have
sufficient recourse to Sharī`ah-compliant funds to mitigate such risk.
6. Rate of Return Risk
Principle 6.1: IIFS shall establish a comprehensive risk management and reporting process to
assess the potential impacts of market factors affecting rates of return on assets in comparison
with the expected rates of return for investment account holders (IAH).
Principle 6.2: IIFS shall have in place an appropriate framework for managing displaced
commercial risk, where applicable.
7. Operational Risk
Principle 7.1: IIFS shall have in place adequate systems and controls, including Sharī`ah
Board/ Advisor, to ensure compliance with Sharī`ah rules and principles.
Principle 7.2: IIFS shall have in place appropriate mechanisms to safeguard the interests of all
fund providers. Where IAH funds are commingled with the IIFS’s own funds, the IIFS shall
ensure that the bases for asset, revenue, expense and profit allocations are established, applied
and reported in a manner consistent with the IIFS’s fiduciary responsibilities.
6.9. RECOMMENDATION, PERFORMANCE INDICATOR AND FUTURE
INITIATIVES FOR THE DEVELOPENT AND RISK MANAGEMENT IN THE
ISLAMIC FINANCIAL SERVICES INDUSTRY
The Ten-Year Framework was created in 2007. The document lays out a roadmap for the
development of the Islamic finance industry, which the challenges the industry is expected to
face in the next ten years, as well as the recommendations for addressing the challenges. A