MANAMA: A key Islamic finance body which proposes industry rules to Islamic lenders said yesterday it plans to monitor Islamic finance products in the absence of a sector watchdog.

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) "will screen products and services offered by the industry for Sharia compliance", it said.

The move is aimed to "homogenise the market", AAOIFI secretary general Mohamad Nedal Alchaar said.

The fledgling Islamic finance industry relies for guidance on a patchwork of standard-setting bodies such as AAOIFI, opinions of Islamic scholars and national regulation.

"Although AAOIFI is not taking on a permanent role of industry watchdog, there exists a current huge gap in the market relating to credible sharia compliance screening of products and services," AAOIFI said.

AAOIFI describes itself as an autonomous corporate body that prepares accounting, auditing, governance, ethics and Sharia standards for Islamic financial institutions and the industry. But it provides product and auditing standards, which are mandatory in seven countries mostly in the Middle East.

Alchaar said AAOIFI would screen products of all Islamic financial institutions, including those which are not members of AAOIFI and in countries where its standards are not mandatory.

"It will be market-wide, regardless of the geographic distribution of products," he said, adding that AAOIFI plans to submit a proposal on its initiative to its board of trustees by the end of the year.

"We are not pretending we are going to be the industry's watchdog, it will be a temporary role because we see the need for screening," he said and added that he expected banks to be open for AAOIFI advising them on products it finds not to be Sharia-compliant as bankers were also interested in greater standardisation of products.