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RIYADH: ¶¶Òõ¶ÌÊÓƵ’s central bank has joined an international standard-setting body for Islamic finance, a move that could help standardize industry practices and ease cross-border transactions in the Kingdom.
The Bahrain-based Acc-ounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) said in a statement it had admitted the ¶¶Òõ¶ÌÊÓƵn Monetary Agency (SAMA) as an institutional member.
Islamic products represent around half of banking system assets in the Kingdom, but the regulator doesn’t distinguish between Islamic or conventional banks and applies the same prudential standards to all of them.
SAMA confirmed the move in a separate statement, without specifying whether it planned to make AAOIFI standards enforceable or if it would adopt all or some of them.
Saudi-based Islamic banks include Al Rajhi Bank and Alinma Bank, while National Commercial Bank is in the process of converting into a full-fledged Islamic lender.
Saudi lenders remain domestically focused, but adopting AAOIFI standards could help them to venture into other Muslim-majority countries.
The Saudi government has also taken steps to tap into Islamic finance, issuing debut Islamic bonds earlier this year denominated in both riyals and US dollars.
Last week, the Jeddah-based Islamic Research and Training Institute said it had signed an agreement to  develop blockchain technology in the Islamic finance sector.
The agreement is the latest effort to combine blockchain technology to tap demand from Muslim investors, with firms from Indonesia to Canada having already received Shariah-compliant certification for their products.
Involvement of the IDB, a multilateral development institution, could also encourage other fintech firms to incorporate Islamic finance to tap markets across the Middle East, Asia and Africa.