• Islamic Finance Rules 2005 (ISFI)

    Click here to view earlier versions of Islamic Finance Rulebook (ISFI).

    Islamic Finance Rulebook (ISFI)
    ISFI Chapter 1:
    General provisions
    ISFI Part 1.1 Preliminary
    ISFI Part 1.2 Key concepts
    ISFI Chapter 2:
    Conduct of Islamic financial business
    ISFI Part 2.1 Authorisation
    ISFI Part 2.2 Conduct of business
    ISFI Part 2.3 Endorsement
    ISFI Chapter 3:
    Disclosure
    ISFI Chapter 5:
    Policies, procedures, systems and controls
    ISFI Chapter 6:
    Shari'a Supervisory Board
    ISFI Part 6.1 Appointment and Operation of a Shari'a Supervisory Board
    ISFI Part 6.2 Shari'a Reviews
    ISFI Part 6.3 Internal Shari'a Review
    ISFI Chapter 7:
    [Deleted]
    ISFI Chapter 8:
    Islamic windows
    ISFI Glossary


    Amended by QFCRA RM/2014-3 (as from 1st January 2015)

    • Background to this Rulebook [Deleted]

      Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 1 ISFI Chapter 1 General provisions

      Amended by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI Part 1.1 ISFI Part 1.1 Preliminary

        Amended by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 1.1.1 Name of rules

          These rules are the Islamic Finance Rules 2005 (or ISFI).

          Amended by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 1.1.2 Glossary

          The glossary at the end of these rules is part of these rules.

          Note 1 There are also relevant definitions in the INAP glossary. To assist the reader, the application of a definition in that glossary is usually indicated by the defined term's being in italics (other than bold italics) in these rules.

          Note 2 By contrast, the application of a definition in the glossary in these rules is not indicated by the defined term's being in italics.

          Note 3 For the application of definitions, see INAP, r 2.1.8 (Application of definitions).

          Note 4 A note on or to these rules is explanatory and is not part of the rules (see INAP, r 2.1.6 (1) and r 2.1.7).

          Note 5 However, examples and guidance are part of these rules (see INAP, r 2.1.4 (1) (b) and (2)).

          Note 6 An example is not exhaustive, and may extend, but does not limit, the meaning of these rules or the particular provision of these rules to which it relates (see INAP, r 2.1.5).

          Note 7 For the effect of guidance, see FSR, art 17 (4).

          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI Part 1.2 ISFI Part 1.2 Key concepts

        • ISFI 1.2.1 What is Islamic financial business?

          Islamic financial business is the business of carrying on 1 or more regulated activities in accordance with Shari'a.

          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 1.2.2 ISFI 1.2.2 What is an Islamic financial institution?

          An Islamic financial institution is an authorised firm whose authorisation includes a condition that the whole of the firm's business must be conducted in accordance with Shari'a.

          Note For firms that conduct a part (but not the whole) of their business in accordance with Shari'a, see ch 8 (Islamic windows).

          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

          • ISFI 1.2.3 What is a profit sharing investment account (or PSIA)? [Deleted]

            Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

    • ISFI Chapter 2 ISFI Chapter 2 Conduct of Islamic financial business

      Amended by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI Part 2.1 ISFI Part 2.1 Authorisation

        Amended by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.1.1 ISFI 2.1.1 Additional requirement for application

          An applicant for authorisation that proposes to conduct its business in accordance with Shari'a must state that fact in its application.

          Amended by QFCRA RM/2012-3 (as from 1st February 2013)

          • ISFI 2.1.1 Glossary [Deleted]

            Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.1.2 Authorisation only if applicant required to be Shari'a-compliant

          The Regulatory Authority may grant an authorisation as an Islamic financial institution only if the applicant's constitutional documents require the business to be conducted in accordance with Shari'a.

          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.1.3 Condition as to compliance with Shari'a

          If the Regulatory Authority grants an authorisation as an Islamic financial institution, the authority must impose on the authorisation a condition that the business must be conducted in accordance with Shari'a.

          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI Part 2.2 ISFI Part 2.2 Conduct of business

        Amended by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.2.1 Other firms not to be held out as Islamic financial institutions etc

          An authorised firm that is not an Islamic financial institution—

          (a) must not hold itself out as an Islamic financial institution; and
          (b) must not hold itself out as conducting Islamic financial business unless the firm's authorisation permits it to operate an Islamic window.

          Note In relation to Islamic windows and their operation, see ch 8.

          Amended by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.2.2 Islamic financial institutions not to conduct other financial business etc

          An Islamic financial institution—

          (a) must not hold itself out as conducting financial business other than Islamic financial business; and
          (b) must not carry on any regulated activity otherwise than in accordance with Shari'a.
          Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI Part 2.3 ISFI Part 2.3 Endorsement [Deleted]

        Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 2.3.1 [Deleted]

          Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 3 ISFI Chapter 3 Disclosure

      • ISFI 3.1 Disclosure requirements in relation to Islamic Financial Business [Deleted]

        Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 3.1.1A Islamic financial institutions to disclose status

        An Islamic financial institution must ensure that it discloses to each customer:

        (a) that it is an Islamic financial institution; and
        (b) that its business is required to be conducted in accordance with Shari'a.
        Amended by QFCRA RM/2019-4 (as from 1st January 2020).

      • ISFI 3.1.1 Disclosure about Shari'a supervisory board

        An Islamic financial institution must disclose the following information to each customer with or for whom it conducts, or proposes to conduct, Islamic financial business:

        (a) the members of the institution's Shari'a supervisory board;
        (b) if the client requests, the manner and frequency of Shari'a reviews.
        Amended by QFCRA RM/2019-4 (as from 1st January 2020).

      • ISFI 3.1.2 ISFI 3.1.2 When disclosure must be made

        An Islamic financial institution must disclose the information in rule 3.1.1:

        (a) before conducting Islamic financial business with or for the customer; and
        (b) thereafter, whenever the information changes.
        Amended by QFCRA RM/2019-4 (as from 1st January 2020).

        • ISFI 3.1.2 Guidance [Deleted]

          Deleted by QFCRA RM/2019-4 (as from 1st January 2020).

      • ISFI 3.1.3 ISFI 3.1.3 Disclosure by Islamic insurers

        An Islamic financial institution which effects or carries out contracts of insurance must disclose in its financial statements—

        (a) those matters set out in AAOIFI FAS 12, in the manner required by AAOIFI FAS 12; and
        (b) those matters set out in AAOIFI FAS 13.
        Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • ISFI 3.1.3 Guidance

          1 One of the important matters required to be disclosed by an Islamic financial institution pursuant to ISFI Rule 3.1.3(b) is the basis applied by the institution in treating any insurance deficit or surplus. Appendix B to AAOIFI FAS 13 provides some guidance as to how such a deficit or a surplus may be treated.
          2 That appendix states that there are a number of ways to address an insurance deficit, including—
          (a) settling the deficit from the reserve of policyholders, if any; and
          (b) borrowing from the shareholders funds or from others the amount of the deficit which should be paid back from future surpluses; and
          (c) asking the policyholders to meet the deficit pro rata; and
          (d) increasing the future premium contribution of policyholders on a pro rata basis.
          3. That appendix also states that there are a number of ways to allocate an insurance surplus, including—
          (a) allocating the surplus to all policyholders, regardless of whether or not they have made claims on the policy during the financial period; and
          (b) allocating the surplus only among policyholders who have not made any claims during the financial period; and
          (c) allocating the surplus among those who have not made any claims and among those who have made claims of amounts less than their insurance contributions, provided that the latter category of policyholders should receive only the difference between their insurance contributions and their claims during the financial period; and
          (d) allocating the surplus between policyholders and shareholders; and
          (e) allocating the surplus by using other methods.
          Amended by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 4 ISFI Chapter 4 Constitutional Documents [Deleted]

      Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 4.1 ISFI 4.1 Islamic Financial Institutions [Deleted]

        Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 4.1.1 [Deleted]

          Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 5 ISFI Chapter 5 Policies, procedures, systems and controls

      Amended by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 5.1.1 General requirement

        An Islamic financial institution must establish, implement and maintain policies, procedures, systems and controls that ensure that its business is conducted in accordance with Shari'a.

        Amended by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 5.1.2 Policy and procedures manual

        An Islamic financial institution must establish, implement and maintain an Islamic financial business policy and procedures manual that addresses the following matters:

        (a) how the compliance oversight function will be undertaken in relation to compliance with Shari'a;
        (b) how the institution's Shari'a supervisory board will oversee and advise it in regard to the institution's Islamic financial business;
        (c) how fatwas, rulings and guidelines of the Shari'a supervisory board will be recorded, disseminated and implemented and the internal Shari'a review undertaken;

        Note For the requirement to conduct an internal Shari'a review, see r 6.3.1.
        (d) how disputes between the Shari'a supervisory board and the institution in relation to Shari'a compliance will be addressed;
        (e) the process for approving the internal policies, procedures, systems and controls to ensure that—
        (i) Islamic financial business is conducted in accordance with Shari'a; and
        (ii) information is disseminated to investors appropriately;
        (f) how conflicts of interest and potential conflicts of interest will be identified and managed.
        Amended by QFCRA RM/2017-3 (as from 1st April 2017).

      • ISFI 5.1 General Requirement [Deleted]

        Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 5.2 ISFI 5.2 Policy and Procedures Manual [Deleted]

        Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 5.2.1 [Deleted]

          Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 6 ISFI Chapter 6 Shari'a supervisory board

      Amended by INAP 3.1.7

      • ISFI Part 6.1 ISFI Part 6.1 Appointment and Operation of a Shari'a Supervisory Board

        Amended by INAP 3.1.7

        • ISFI 6.1.1 Appointment of Shari'a supervisory board

          An Islamic financial institution must—

          (a) appoint a Shari'a supervisory board; and
          (b) ensure that—
          (i) its Shari'a supervisory board consists of at least 3 members; and
          (ii) the members appointed to the Shari'a supervisory board are competent to perform their functions as Shari'a supervisory board members taking into account their qualifications and previous experience; and
          (iii) any appointments, dismissals or changes in respect of members of the Shari'a supervisory board are approved by the governing body of the Islamic financial institution; and
          (iv) no member of the Shari'a supervisory board is a director or controller of the Islamic financial institution.
          Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • ISFI 6.1.2 Policy in relation to Shari'a supervisory board

          An Islamic financial institution must document its policy in relation to—

          (a) how appointments, dismissals or changes will be made to the Shari'a supervisory board; and
          (b) the process through which the suitability of Shari'a supervisory board members will be considered; and
          (c) the remuneration of the members of the Shari'a supervisory board.
          Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • Record-keeping

          Amended by INAP 3.1.7

          • ISFI 6.1.3

            An Islamic financial institution must establish and retain records of—

            (a) its assessment of the competence of the Shari'a supervisory board members; and
            (b) the agreed terms of engagement of each member of the Shari'a supervisory board;

            for at least 6 years following the date on which the individual ceased to be a member of the Shari'a supervisory board.

            Amended by QFCRA RM/2012-3 (as from 1st February 2013)

          • ISFI 6.1.4 Records of assessment of competency of Shari'a supervisory board

            The records of the assessment of competence of Shari'a supervisory board members in ISFI rule 6.1.3(a) must include at a minimum—

            (a) the factors that have been taken into account when making the assessment of competence; and
            (b) the qualifications and experience of the Shari'a supervisory board members; and
            (c) the basis upon which the Islamic financial institution considers that the proposed Shari'a supervisory board member is suitable; and
            (d) details of any other Shari'a supervisory boards of which the proposed Shari'a supervisory board member is, or has been, a member.
            Amended by QFCRA RM/2015-3 (as from 1st January 2016).

          • ISFI 6.1.5 Independence of Shari'a supervisory board

            An Islamic financial institution must take reasonable steps to ensure that the members of the Shari'a supervisory board are independent of and not subject to any conflict of interest with respect to the the institution.

            Amended by QFCRA RM/2015-3 (as from 1st January 2016).

          • ISFI 6.1.6 Information about Shari'a supervisory board to be given to Regulatory Authority

            An Islamic financial institution must provide the Regulatory Authority, upon request, with information on its appointed or proposed Shari'a supervisory board members with regard to the qualifications, skills, experience and independence of the Shari'a supervisory board members.

            Amended by QFCRA RM/2015-3 (as from 1st January 2016).

          • ISFI 6.1.7 Obligation to assist Shari'a supervisory board

            An Islamic financial institution must take reasonable steps to ensure that it and its Employees

            (a) provide such assistance as the Shari'a supervisory board reasonably requires to discharge its duties; and
            (b) give the Shari'a supervisory board right of access at all reasonable times to relevant records and information; and
            (c) do not interfere with the Shari'a supervisory board's ability to discharge its duties; and
            (d) do not provide false or misleading information to the Shari'a supervisory board.
            Amended by QFCRA RM/2015-3 (as from 1st January 2016).

      • ISFI Part 6.2 ISFI Part 6.2 Shari'a reviews

        Amended by INAP 3.1.7

        • ISFI 6.2.1 Shari'a reviews to be undertaken

          An Islamic financial institution must ensure that all Shari'a reviews are undertaken by the Shari'a supervisory board in accordance with the AAOIFI Standards on Governance (GSIFI No 2).

          Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • ISFI 6.2.2 Annual Shari'a report

          (1) An Islamic financial institution must commission an annual report from the Shari'a supervisory board which complies with the AAOIFI Standards on Governance (GSIFI No 1).
          (2) An Islamic financial institution must give the Regulatory Authority a copy of each annual report of the firm's Shari'a supervisory board within 3 months after the day the relevant financial year of the institution ends.

          Example

          If a financial year of an Islamic financial institution ends on 31 December in a year, the annual report of the institution's Shari'a supervisory board must be given to the Regulatory Authority before 1 April in the next year.

          Amended by QFCRA RM/2017-3 (as from 1st April 2017).

        • ISFI 6.2.3 Financial communication

          (1) Before an Islamic financial institution issues or approves a financial communication, it must ensure that, in addition to the information required by the Customer and Investor Protection Rules 2019, the material states which Shari'a supervisory board has reviewed the products or services to which the material relates.
          (2) Financial communication means any communication (made through any medium including brochures, telephone calls and presentations) the purpose or effect of which is:
          (a) to promote or advertise:
          (i) specified products; or
          (ii) any regulated activity (or any activity that would be a regulated activity if it was carried on in or from the QFC); or
          (b) to invite or induce any person:
          (i) to enter into an agreement with any person in relation to a specified product; or
          (ii) to engage in any regulated activity (or an activity that would be a regulated activity if it was carried on in or from the QFC).
          Amended by QFCRA RM/2019-4 (as from 1st January 2020).

      • ISFI Part 6.3 ISFI Part 6.3 Internal Shari'a review

        Amended by INAP 3.1.7

        • ISFI 6.3.1 Obligation to perform internal Shari'a reviews

          An Islamic financial institution must perform an internal Shari'a review to assess the extent to which the institution complies with fatwas, rulings and guidelines issued by its Shari'a supervisory board.

          Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • ISFI 6.3.2 How reviews to be performed

          An Islamic Financial Institution must perform the internal Shari'a review in accordance with the AAOIFI Standards on Governance (GSIFI No. 3).

          Amended by QFCRA RM/2015-3 (as from 1st January 2016).

        • ISFI 6.3.3 [Deleted]

          Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • ISFI 6.3.4 ISFI 6.3.4 Who must perform internal Shari'a reviews

          An Islamic financial institution must ensure that—

          (a) the internal Shari'a review is performed by its internal audit function or compliance oversight function; and
          (b) the individuals or departments involved in performing the review are competent and sufficiently independent to assess compliance with Shari'a.
          Amended by QFCRA RM/2017-3 (as from 1st April 2017).

          • ISFI 6.3.4 Guidance

            For the purposes of assessing competency of personnel or departments which perform the internal Shari'a review, Islamic financial institutions should consult the AAOIFI Standards on Governance (GSIFI No. 3).

            Amended by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Chapter 7 ISFI Chapter 7 Conduct of business standards [Deleted]

      Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

      • ISFI Part 7.1 ISFI Part 7.1 Conduct of Islamic Financial Business [Deleted]

        Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

        • Profit Sharing Investment Accounts [Deleted]

          Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

          • ISFI 7.1.1 [Deleted]

            Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

          • ISFI 7.1.2 Contents of terms of business [Deleted]

            Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

          • ISFI 7.1.3 [Deleted]

            Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

        • Islamic Window [Deleted]

          Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

          • ISFI 7.1.4 [Deleted]

            Deleted by QFCRA RM/2012-3 (as from 1st February 2013)

        • Financial communication [Deleted]

          Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

          • ISFI 7.1.5 [Deleted]

            Deleted by QFCRA RM/2014-3 (as from 1st January 2015)

    • ISFI Chapter 8 ISFI Chapter 8 Islamic windows

      • ISFI 8.1.1 What is an Islamic window?

        If an authorised firm conducts a part (but not the whole) of its business in accordance with Shari'a, the part so conducted is an Islamic window.

        Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 8.1.2 What kinds of business may be conducted by means of an Islamic window?

        (1) Only insurance business (within the meaning given in PINS, rule 1.2.4) may be conducted by means of an Islamic window.
        (2) An authorised firm that is a banking business firm (within the meaning given in BANK) or an INMA firm (within the meaning given in INMA) must not operate an Islamic window.
        Amended by QFCRA RM/2014-3 (as from 1st January 2015)

      • ISFI 8.1.3 Authorisation to operate Islamic window

        (1) An applicant for authorisation that proposes to operate an Islamic window must state that fact in its application.
        (2) An authorised firm that proposes to operate an Islamic window must apply to the Regulatory Authority for an appropriate variation of the conditions of its authorisation.
        Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 8.1.4 Conditions of operating Islamic windows

        (1) An authorised firm that operates an Islamic window—
        (a) must identify the part or parts of its business that are to be conducted in accordance with Shari'a; and
        (b) must establish and maintain policies, procedures, systems and controls that ensure that that part or those parts are so conducted.
        (2) An authorised firm that operates an Islamic window must comply with—
        (a) chapter 3 (except rule 3.1.1A); and
        (b) chapter 5;
        in relation to the part or parts of its business conducted by means of the window.
        (3) For the application of chapter 3 and chapter 5 to such a firm, references to an Islamic financial institution are to be read as references to the firm.
        (4) The firm must ensure that the disclosures required by AAOIFI FAS 18 are made to each customer with or for whom it conducts Islamic financial business.
        Amended by QFCRA RM/2019-4 (as from 1st January 2020).

      • ISFI 8.1.5 Shari'a supervisory board

        (1) An authorised firm that operates an Islamic window must comply with chapter 6 in relation to the part or parts of its business that is conducted by means of the window.
        (2) For the application of chapter 6 to such a firm, references to an Islamic financial institution are to be read as references to the firm.
        Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

      • ISFI 8.1.6 Performance of internal Shari'a review

        (1) An authorised firm that operates an Islamic window must, to the extent possible, perform the internal Shari'a review in accordance with the AAOIFI Standards on Governance (GSIFI No. 3).

        Note An authorised firm that operates an Islamic window must perform an internal Shari'a review of the firm's compliance with fatwas, rulings and guidelines issued by its Shari'a supervisory board — see r 6.3.1, as applied by r 8.1.5.
        (2) If the firm cannot perform its entire internal Shari'a review in accordance with those standards, it must document how it will perform the remainder of that review.
        Inserted by QFCRA RM/2012-3 (as from 1st February 2013)

    • ISFI Glossary

      (see r 1.1.2)

      AAOIFI means the Accounting and Auditing Organisation for Islamic Financial Institutions.

      authorisation means an authorisation granted under the Financial Services Regulations, part 5.

      authorised firm (or firm) means a person that has an authorisation.

      BANK means the Banking Business Prudential Rules 2014.

      customer means a person to whom an Islamic financial institution provides, has provided or offers to provide a service or product.

      INMA means the Investment Management and Advisory Rules 2014.

      Islamic financial business has the meaning given by rule 1.2.1.

      Islamic financial institution has the meaning given by rule 1.2.2.

      Islamic window has the meaning given by rule 8.1.1.

      month means calendar month — that is, the period beginning at the start of any day of one of the 12 named months of the year and ending:

      (a) at the end of the day before the corresponding day on the next named month; or
      (b) if there is no corresponding day — at the end of the last day of next named month.

      QFC means Qatar Financial Centre.

      Regulatory Authority means the Regulatory Authority of the QFC.

      Shari'a supervisory board, of an authorised firm, means the board appointed for the firm under rule 6.1.1.

      Amended by QFCRA RM/2019-4 (as from 1st January 2020).