Scholarly debate drives reform

When Sheikh Muhammad Taqi Usmani, chairman of the Accounting and Auditing Organisation for Islamic Financial Institutions (Aaoifi)'s shariah board suggested that roughly 85% of existing non-ijara sukuk issues would fall foul of basic shariah principles, it was the first real evidence of how Aaoifi's influence could manifest itself in the world of sukuk. This influence lies in the hands of a few market-leading shariah scholars who are members of Aaoifi's shariah board and who chose Aaoifi as a platform to voice a growing discontent at the direction that the industry has taken over the last five years.

Debt versus equity In a February 2008 statement, Aaoifi's key scholars sought to identify the core principles for structuring and implementing sukuk transactions, principles which those scholars felt were being conveniently disregarded in an increasingly volume-based industry. Quality not quantity seemed to be the underlying message. Standing out among the concerns expressed by Aaoifi...