April 9 (Reuters) - The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is close to finalising governance and sharia standards for Islamic endowments, known as awqaf, the Bahrain-based body said on Sunday.
AAOIFI, one of the main standard-setting bodies in Islamic finance, started work last year on developing guidance for awqaf - which receives donations from Muslims to operate social projects, such as mosques, schools and welfare schemes.
Development of an accounting standard for awqaf is also underway, Deputy Secretary General Omar Mustafa Ansari said during AAOIFI’s annual sharia conference being held in Manama this week.
AAOIFI standards typically address the financial products offered by Islamic banks and insurers, but extending its reach to awqaf could help unlock large pools of otherwise idle assets.
A governance standard for awqaf, for instance, would provide guidance on internal controls, policies and procedures, transparency and disclosures.
According to a Dubai government estimate, awqaf may hold around $1 trillion in assets around the globe.
Management of those assets has struggled to keep up with their expansion, many being poorly managed and earning low returns, sometimes requiring further donations to keep them running.
Most awqaf do not disclose full financial figures, although their underperformance is believed to be considerable since they have traditionally been run by administrators rather than return-oriented investment managers. (Reporting by Bernardo Vizcaino; Editing by Himani Sarkar)