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AAOIFI Shariah Standards, a truly remarkable book

AAOIFI Shariah Standards, a truly remarkable book

By Nizar Alshubaily | January 04, 2019

The AAOIFI Shariah Standards Book is truly an excellent and remarkable book for all students and practitioners of Islamic Finance. A brief quote from the Foreword by the Secretary General of AAOIFI:

“The volume of Shari’ah Standards has become the major compilation of contemporary Fiqh reasoning in the area of Fiqh al-Mu’amalat (Jurisprudence of Financial Transactions) around the globe.”

This is true. But it’s only when you actually review this book thoroughly that you get its full scope, and the extraordinary level of learning that can be derived from it.

Many students and professionals within the Islamic Finance industry still do not realise the breadth and depth of such a publication, which is why I felt obliged to write about it and summarise its potential through the quote above.

Individuals tend to keep it somewhere in their files, however fail to continuously refer to it in many matters regarding Islamic Finance. In addition, many who teach Islamic Finance are not utilising its full potential for learning in their classes.

It’s the work of many people who have endeavoured to make such a major compendium available. It’s the distillation of the thoughts of so many prominent Shariah scholars form various countries and covering all major schools of Islamic Law.

It has 54 standards, starting from Trading in Currencies and ending in Revocation of Contracts. But it’s much more than just a number of standards with a few clauses; it’s a full body of work that encompasses numerous Verses, Hadith, Fiqh Literature, and modern Fatwas of Islamic Organisations and Financial Institutions.

What is extremely helpful about this book; is its use of excellent references that give the reader the full information required to understand the basis of each standard. Each standard has at the end in the Appendix a section entitled “The Shariah Basis For The Standard.” This is such an extremely helpful section, that I can’t recommend it enough for any student or professional in the Islamic Finance industry.

When one is learning Islamic Finance, one has to learn all the contracts, their basis in The Quran, Sunnah, and Ijmaa. One has to read a lot and review large chapters of classic Fiqh books and interpretations to make sense of it all. The AAOIFI Standards makes it easier by giving the reader what’s relevant all in one place. Take this example of the Salam contract:

"Permissibility of Salam 

A contract of Salam derives its permissibility from the Qur`an, the Sunnah and Ijma’ (consensus of Fuqaha). On the level of the Qur`an, Allah, the Almighty, says: {“O ye who believe! When you deal with each other, in transactions involving future obligations in a fixed period time, reduce them to writing”}.(2) Ibn Abbas said: “I declare that a Salaf (Salam) contract in which the commodity is guaranteed for future delivery has been permitted by Allah” and then he read: {“O ye who believe! When you deal with each other, in transactions involving future obligations in a fixed period time, reduce them to writing”}. It is reported that Ibn Abbas said: “This verse is a revelation for the particular purpose of making Salam permissible.”(3) 

On the level of Sunnah, Ibn Abbas is reported to have said: “The Prophet (peace be upon him) has came to Medina and found that people were selling dates for deferred delivery after a duration of one or two years on a Salam basis. The Prophet (peace be upon him) said: ‘Whoever pays for dates on a deferred delivery basis (Salam) should do so on the basis of a specified scale and weight’”. In another text of the Hadith the Prophet (peace be upon him) said: “Whoever pays on a deferred delivery basis should do so on the basis of a specified scale, weight and date of delivery”.(4) 

The notes at the end of the page give you the specific references:

(2) [Al-Baqarah (The Cow): 282].

(3) See: Ibn Al-Jawzi, “Zad Al-Masir Fi ’Ilm Al-Tafsir” [1: 336]; and Ibn Kathir, “Tafsir Al-Qur`an Al-’Azim” [1: 496].

(4) The Hadith has been related by Al-Bukhari, Muslim and others. See: “Sahih Al-Bukhari” [2: 781], Damascus: Dar Al-Qalam edition; and “Sahih Muslim” [3: 1226], Beirut: Dar Al-Fikr edition."

It also gives you great details that increase your knowledge such as:

If payment is delayed, the transaction is not called Salam.(10)

(10) Ibn Qudamah, “Al-Mughni”, [6: 408]

So now you know a detail about the contract and how it was considered in the past by eminent scholars; such as Ibn Qudamah (died 1223 A.D.) and one of his wonderful books.

Here in the above example, one gets the full reference to the Shariah Basis of this contract, Verses, Hadith, and Book references to look up. One learns how everything is related.

The use of Quranic verses is very important, as many times, people read The Quran without an interpretation and are not fully aware of the meaning of the verse and its relation to the Islamic Finance subject. Here’s a good example that many may not be aware of: In the Shariah Basis of Standard (12) on Sharikah (Musharakah) we see:

"The permissibility of Sharikah is supported by the Saying of Allah, the Almighty: {“...And, verily, many partners oppress one another, except those who believe and do righteous good deeds, and they are few...”}.(2) 

(2) [Sad: 24]"

So now you know where Sharikah appears in The Quran.

Here’s another example from Standard (5) on Guarantees:

"Permissibility of personal guarantees 

Personal guarantees derive their permissibility from the Qura`n, Sunnah, consensus and reasoning. In the Qura`n, Allah, the Almighty, says: {“They said: ‘We miss the great beaker of the king; for him who produces it, is (the reward of) a camel load; I will be bound by it’”}.(6) 

(6) [Yusuf (Joseph): 72]"

This one is interesting because you will also see this verse quoted in the Shariah Basis of Standard (15) on Ju’alah, as it involves a Ju’alah contract with a payment of a Camel Load, which is being Guaranteed by the speaker.

Speaking of Sharikah as an example, we also learn very interesting information about contracts, and the underlying basis. In the Shariah Basis of the standard on Sharikah we learn that:

“The general basis of Sharikah is agency (Wakalah) because each partner is acting as a principal partner, on one hand, and acting in the interest of the partnership, on the other hand, as an agent for the remaining partners. And

“The basis for the right of each partner to participate in the management of the partnership is that partnership is based on elements of agency and trust. The element of agency requires that each party be entitled to be involved in the operations in a manner that is in the interest of the partnership. The element of trust requires that each party act for the benefit of the partnership.(13)

 (13) See: “Al-Mughni” [7: 128]" Here they are referring to the book by Ibn Qudamah, previously mentioned.

There are many jewels of knowledge within the pages of these standards; such as the above; that are not taught to beginner or even intermediate Islamic Finance students. One can gain a lot from these standards.

Here’s another example of an issue not much found in many modern Islamic Finance books. This is from Standard (18) Possession (Qabd):

“3/3 Actual possession takes place in movables through physical corporeal delivery. Constructive possession, in ascertained movables as well as in those established as a liability by description, takes place -after their ascertainment by means of one of the methods known for their ascertainment- by relinquishing (releasing) the thing for the person entitled to it enabling him to deliver it without any obstacle even when no transportation or transmission has taken place… through one of the customary units of measure -cubic measure, weight or linear measure-”

Here above the discussion is on what constitutes Possession, more specifically Constructive Possession. It is referring to the old custom that possession of an item has taken place when the item has been separated from others, such as foods by volume, or gold by weight, and even cloth by being cut to size. This is an important element as it goes to the heart of when liability of a product commences.

Here’s also a very important point, much used and sometimes misused within the industry and is very important for all students and practitioners to know. This is from Standard (25) on Combination of Contracts:

“3. Shari’ah Status of Combination of Contracts 

It is permissible in Shari’ah to combine more than one contract in one set, without imposing one contract as a condition in the other, and provided that each contract is permissible on its own. Combining contracts in this manner is acceptable unless it encounters a Shari’ah restriction that entails its prohibition on exceptional basis.”

It then goes to detailing such prohibitions such as combining a sale and lending in one contract and any arrangement that leads to Riba.

These standards also inform the reader which books to refer to for further reading. Great books such as “Bada’i Al-Sana’i” by Al-Kasani, “Kashaf Al-Qinaa” by Al-Buhuti, “Radd Al-Muhtar” by Ibn Abidin, “Bidayat Al-Mujtahid” by Ibn Rushd, or even modern books such as “Al-Fiqh Al-Islami Wa Adillatuhu” by Wahabah Al-Zuhayli. You can in fact download many of these books free online from such sites as, or

There are so many references of classic as well as modern Fiqh books in these Standards. This is extremely helpful to anyone trying to accumulate his own library of the more relevant books. 

But that’s not all. It also gives you another Appendix in which certain terms used in contracts are defined:


Iqalah or cancellation of a contract is a bilateral agreement of the contracting parties to abate and remove the legal effect of a contract.”

These definitions are very important for anyone wishing to learn about Islamic Finance, as many of these terms are not ordinarily used in many Islamic Banking books. Here’s another one that’s usually confused, from Standard (31): Controls on Gharar in Financial Transactions:

“Jahalah (Ignorance) 

The difference between Gharar and Jahalah is that Jahalah refers to lack of knowledge about the details of something, in spite of knowledge about its occurrence. In this sense, Gharar is more comprehensive than Jahalah. Therefore, all things that are unknown involve Gharar, whereas not all things that involve Gharar are unknown.” 

And there’s more. Let’s take a look at what else is there by using the Istisna’a standard. We take a look at the Shariah Basis for the standard and we see the following:

“Legitimacy of Istisna’a Contract 

The Istisna’a is a binding contract and not a mere promise. The International Islamic Fiqh Academy has issued a resolution in support of the legitimacy of Istisna’a.(3) 

(3) International Islamic Fiqh Academy Resolution No. 65 (3/7).” 

So here we see that there’s also another group of eminent modern scholars who have also reviewed the contract and have made rulings on the subject. The references are given so we can in fact look it up and read the resolution and learn more details. These resolutions would be very useful to have as a collection readily available for any future references. You can in fact get all the resolutions of the International Islamic Fiqh Academy at:

If you read carefully, you would also notice sometimes the disagreements between schools of jurisprudence, this way you will be acquainted with which group approves what. This is very helpful, as Islamic Finance is in many countries, which may rely on different schools of jurisprudence. In the Shariah Basis of Standard (7) on Hawala, we read:

“Types and Rulings of a Hawalah Contract

The scholars have unanimously endorsed the permissibility of restricted Hawalah, whether it is restricted to a debt owed to the transferor by the payer or it is restricted to the value of a tangible good belonging to the transferor in the possession of the payer. The unrestricted Hawalah is permitted by the Hanafis only. They based this permissibility on the Prophet’s (peace be upon him) order that a Hawalah deal must be accepted, without indicating that the payer must be a debtor to the transferor or not. This shows the permissibility of both the unrestricted and restricted Hawalah.”

But there’s much more in this book. You may think it only covers banking and finance issues that are performed by Islamic Financial Institutions. It in fact contains sections on very important financial issues within Shariah: Waqf, and Zakah, both of which are discussed in detail.

In these one learns interesting historical events and relevant rules. In the Waqf standard for example, one learns that it was practiced from very early on from the Hadith concerning a land in Khybar donated by Umar as Waqf upon the advice of the Prophet (peace be upon him). 

And in the Zakah standard, one learns that it is not mandatory for the Zakah to cover all mentioned categories, it can be confined to some of them. This sometimes is not well understood by Zakah payers.

And that’s not all. It also contains sections covering important issues such as Arbitration, Insolvency, Financial Rights, Termination Options, and Revocation of Contracts; all very important subjects not usually much discussed by Islamic Finance students or practitioners.

Today, with increased competition, Islamic Bankers need to be aware of so much more than just rules of financing and investments. The above subjects will allow for a more comprehensive advice and service offered to clients.

A unique aspect of this Standards book is the level of transparency it entails. In the Appendix of each standard there is a section detailing the history of the preparation of each standard. What many people may not realise is that many concerned parties are given a chance to comment publicly on such standards in order to explain and improve upon such standards. Here’s a paragraph from one such standard:

“The Secretariat of AAOIFI held a public hearing in the Kingdom of Bahrain on 6 Jumada II, 1434 A.H., corresponding to 16 April 2013 A.D. The public hearing was attended by representatives of central banks, institutions, auditing firms, Shari’ah scholars, academics and others interested in this field. The members of the Shari’ah Board and the Shari’ah Standards Committee responded to a number of observations raised by the participants.”

Not only that, but the AAOIFI in fact cares very much about the opinion of participants that it actually gives you an email address to send any mistakes you spot or suggestions on standards:

“We warmly welcome your remarks and feedback, including errata, on existing standards and your proposals as to new standards, on our email:”

This book is really impressive. Within its 1262 pages is a distillation of the best thinking on matters encompassing 1400 years of scholarly work. It has hundreds of references to Verses, Hadiths, Resolutions of Islamic Fiqh Organisations, Definitions, and references to Classic and Modern Fiqh Books.

This is a living book, it can be revised, added to, and improved; and above all, it takes into account all the new financial and commercial innovations, which makes it perhaps the most useful “Fiqh Al-Mu’amalat” book ever produced.

I congratulate and thank everyone who has participated in its production.

I hope this brief overview of the Shariah Standards was helpful and has given you an interesting look inside a truly useful and great work.

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Researcher, C/S

JazakalLah brother for the synopsis. This is coming at an appropriate time for me ...... (edited)

Banker, Writer

You are most welcome brother, and thank you so much for your kind words.

Institute of Business Finance and Industry

jazakaallah. very interesting and useful summary (edited)

Banker, Writer

السلام عليكم ورحمة الله وبركاته

Thank you so much brother Muhammad

جزانا وجزاكم إن شاء الله