The Islamic finance infrastructure includes payment-settlement systems, financial markets and

products, legal frameworks, regulators and supervisors, Shariah governance institutions,

ratings agencies, data collectors, and research and development entities. A legal framework

allows for the certainty and legitimacy of financial contracts. However, in Islamic finance, legal

infrastructure is especially important in enforcing Shariah principles. The Shariah Board is the

primary adjudicator of all matters regarding financial contracts and their relevance to Islamic

law. Rating agencies similarly give investors the ability to compare companies, but from an

unbiased, independent perspective.

As most of the IIFSs are small in size, industry experts have emphasized diversification and

specialization of instruments. The Accounting and Auditing Organization for Islamic Financial

Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) focus on strengthening

the CG of IIFS. The International Islamic Financial Market (IIFM), the International Islamic

Rating Agency (IIRA), the International Islamic Centre for Reconciliation and Commercial

Arbitration (IICRA), the General Council of Islamic Banks and Financial Institutions, and the

Islamic Development Bank Group (IDB) support the development of infrastructure to

implement Islamic finance (ISRA 5).

The Islamic Financial Services Board (IFSB) is set up as an international platform to promote

and enhance the soundness of the industry by issuing global prudential standards and guiding

principles for the Islamic financial services industry. Following the global financial crisis of

2007 and European sovereign debt crisis, the IFSB has undertaken a number of initiatives to

address the development taking place in the global financial industry. Such initiatives include -

the issuance of the IFSB’s

Guiding Principles on Liquidity Risk Management for IIFS

, the

Guiding

Principles on Stress Testing for IIFS

, and ED-15:

Revised Capital Adequacy Standard.

The AAOIFI creates standards on accounting, auditing, governance, ethics, and Shariah for IIFS.

In 2012, the AAOIFI issued seven new standards on governance, ethics, and customer

protection and revised accounting standards on real estate investments. In addition, the

AAOIFI is also reviewing the standards on investment accounts and Takaful and creating new

governance standards for the Shariah Supervisory Board (IFSB 74).

The Shariah-compliant Lender of Last Resort, or SLOLR, facility is a financial safety net. It

differs from the traditional LOLR in that the financial contracts supporting its structure must

be Shariah compliant. Open market operations (OMOs) and standing facilities are the two

mechanisms used by RSAs for monetary operations of the central bank. According to a survey

by the IFSB, RSAs made use of OMOs and standing facilities, but these two tools did not

necessarily comply with Shariah and were not suitable for transactions with the IIFS. The

survey also showed that, in a quarter of the RSAs’ jurisdictions, there were no SLOLR facilities;

however, but they did distinguish between conventional financial service institutions and the

IIFS.

One of the major entities responsible for settling financial disputes is the International Islamic

Centre for Reconciliation & Arbitration located in the UAE. The IICRA focuses on mediating and

settling disputes between Shariah compliant financial or commercial institutions. Their work