Islamic finance is a sub-set of the conventional global financial system. It is not a parallel system to the conventional financial system. The conventional financial system has been in operation and has evolved significantly over the last 300 years, whereas Islamic finance is relatively new and has been in existence for just over 30 years.
As a result of this age difference and for practical reasons, financial markets, the banking industry, regulators, tax authorities, investors, and the general public are all familiar with the IFRS (International Financial Reporting System) format, which is broadly used for capital adequacy, taxation, investment, credit analysis, and industry-comparison purposes.
This explains why, globally, out of 57 Islamic countries and more than 10 non-Islamic countries hosting the Islamic finance system, only eight jurisdictions — Bahrain, DIFC (Dubai), Oman, Jordan, Lebanon, Qatar, Sudan, and Syria —h ave made compliance with Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) standards mandatory. Some larger jurisdictions, such as Malaysia, Indonesia, Pakistan, Saudi Arabia, South Africa, and Australia, have issued guidelines based on AAOIFI standards.
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