Islamic International Rating Agency (IIRA) has reaffirmed its Shari’a Quality Rating of AA (SQR) assigned to Jordan Islamic Bank (JIB). This rating indicates JIB’s conformance to very high standards of Shari’a compliance in all aspects of Shari’a quality analysis.
Rating derives strength from JIB’s overall organizational culture, which encourages conformance with Islamic precepts and stems from the vision of the bank’s Board of Directors and senior management team. JIB is the largest Islamic bank and the third largest commercial bank in the Hashemite Kingdom of Jordan having a share of 12% in total industry deposits, and as such is considered a forerunner in the Islamic banking industry. It is in majority owned by AlBaraka Banking Group (ABG), one of the most prominent Islamic banking groups in the world. Moreover, the bank has garnered significant value as an Islamic brand, since its inception in 1978.
The bank has traditionally been supervised by an eminent Shari’a Supervisory Board, the operations of which conform to the guidelines laid out in the Corporate Governance Guide of the bank, encompassing JIB’s policies relating to Shari’a Governance. The ‘fit and proper’ criteria for SSB members are defined in the regulatory framework and terms of reference of SSB are specifically laid down in the said guide. Deliberations in the Shari’a meetings are comprehensive and include discussions on Shari’a compliance related matters as well as a brief review of the organization’s overall financial health. Further enhancement in the level of involvement of SSB members in Shari’a related controls instituted within the bank and including sample review of major transactions, would be viewed more favorably.
Shari’a Audit and Compliance has been combined as one function within the purview of Internal Audit and Shari’a department. Best practice entails presence of two independent departments for Shari’a Audit and Compliance reporting directly to the SSB. Shari’a governance infrastructure draws support from the institution’s overall governance standards, which are deemed satisfactory. The bank’s Board of Directors has an adequate representation of independent directors, while recommended Board committees are also in place. Transparency of financial reporting by the bank with regards to investment accounts and corporate governance disclosures are generally in line with the recommended best practices by IFSB.
The bank extends financing facilities to its customers under three Islamic product structures; however, Murabaha (including deferred sales) remains the dominant mode of financing. Diversification of Islamic financing structures in the portfolio is recommended by Shari’a scholars. Relevant policies and procedures regarding profit distribution mechanism, investment risk fund, Shari’a screening criteria and profit purification are documented and disclosed by the bank.