## Terms of Reference — Joint Task Team on Islamic Finance ## Source details **Canonical URL:** [Terms of Reference — Joint Task Team on Islamic Finance](https://www.imf.org/-/media/files/data/statistics/bpm6/iftt/iftt.pdf) ## Other formats - [Markdown version](/-/media/files/data/statistics/bpm6/iftt/iftt.pdf.md) - [Structured JSON version](/-/media/files/data/statistics/bpm6/iftt/iftt.pdf.json) --- ### Introduction - Islamic finance follows Shari’ah Islamic law and does not permit receipt and payment of "riba" (interest), "gharar" (excessive uncertainty), "maysir" (gambling), and short sales or financing activities considered harmful to society. Parties must share risks and rewards, transactions must have a real economic purpose without undue speculation, and must not involve exploitation of either party. - Islamic financial standard-setting bodies such as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and the Islamic Financial Services Board (IFSB) have developed standards on accounting, auditing, governance, regulatory framework, capital adequacy, and risk management to harmonize practices and facilitate integration into the international financial system. - International statistical standards provide limited guidance on integrating Islamic finance into macroeconomic and financial statistics. Annex 4.3 of the IMF’s Monetary and Financial Statistics Manual and Compilation Guide (MFSMCG) offers a detailed description of how Islamic financial corporations (IFIs) operate and classifies Islamic financial assets and liabilities by type of conventional financial instrument within the framework of monetary and financial statistics in line with the System of National Accounts 2008 (2008 SNA). - There is a need for further integration of Islamic finance and related principles/concepts into macroeconomic and financial statistics, requiring additional methodological and practical guidance. - The international statistical community agreed to launch an update of international statistical standards at the 51st session of the United Nations Statistical Commission in March 2020, increasing attention to the statistical treatment of Islamic finance. - Two broad approaches emerged from meetings and discussions: - Position 1: Principles/concepts of Islamic finance, Islamic financial instruments and their property income, and Islamic financial corporations and their output can be fully integrated and bridged into conventional statistical frameworks without revisiting those frameworks. - Position 2: Full integration and proper capturing of Islamic finance warrant additional methodological articulations and possibly new or hybrid types of financial instruments and property income, and additional instrument and/or sector breakdowns, because certain Islamic financial instruments and financial corporations have different features compared to those defined in current statistical standards. - The Advisory Expert Group (AEG) on National Accounts discussed Islamic Banking at its 10th meeting in Paris, France, in 2016 and noted differences in business arrangements between Islamic banking and conventional banking, recognized the systemic importance and rapid growth of Islamic banking in some economies, and agreed that further research and practical guidance are required. - The IMF Balance of Payments Committee (BOPCOM) in 2019 agreed there is a need for guidance on the statistical treatment of Islamic finance in macroeconomic statistics and external sector statistics (ESS). ISWGNA and BOPCOM agreed to form a joint task team to prepare a joint guidance note on the treatment of Islamic finance in national accounts and in ESS. ### Objectives - The joint task team has been established by the ISWGNA and BOPCOM to carry out further research and develop methodology/guidance on the treatment of Islamic finance in national accounts and ESS. - Specific objectives: - Review the current practices, structure, classification of Islamic financial instruments and their property income. - Assess whether changes in the methodology of national accounts and ESS are required to allow for full and proper reflection of Islamic finance in macroeconomic and financial statistics. - Assess whether Islamic Banks should be considered in the same way as conventional banks, or as managers of mutual funds or non-money market funds. - Assess the statistical implications of the choice above. - Based on the outcomes, provide detailed guidance on the classification and recording of Islamic financial instruments and their property income, Islamic financial transactions, and Islamic financial corporations and their output in the national accounts and ESS. ### Governance and participation - The joint task team is established by the ISWGNA and BOPCOM and is chaired by the United Nations Statistics Division (UNSD). The Secretariat will be provided by the United Nations Economic and Social Commission for Western Asia (ESCWA). - Membership should include experts in national accounts, ESS, financial accounts, and other macroeconomic statistics from countries where Islamic finance is prevalent, and experts from relevant international/regional organizations. Members are expected to actively engage in discussions and drafting of guidance notes and recommendations. - Working arrangements are expected to consist mainly of electronic communication through circulation of documentation and collection of comments on specific topics. Face-to-face meetings could be organized if necessary. ### Reporting - The joint task team will report to the ISWGNA and BOPCOM in accordance with the SNA update procedures established by the United Nations Statistical Commission and the balance of payments update procedures established by the IMF. ### Timeline and deliverables - Work period: April 2020–September 2021. - Key deliverables and timetable: - Preliminary joint guidance notes (ISWGNA/BOPCOM) submitted to the next AEG and BOPCOM meetings in October 2020. - Final joint guidance notes (ISWGNA/BOPCOM) to be presented at the October 2021 AEG and BOPCOM meetings. --- _Source: https://www.imf.org/-/media/files/data/statistics/bpm6/iftt/iftt.pdf_