April 20 (Reuters) - The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) will develop a package of standards covering Islamic endowments, known as awqaf, the Bahrain-based body said late on Wednesday.
AAOIFI, one of the main standard-setting bodies in Islamic finance, said its board had approved a plan to issue guidance covering sharia-compliance, accounting and governance of awqaf, with a working group established for the project.
AAOIFI standards typically address the financial products offered by entities including Islamic banks and insurers, as well as their internal book-keeping.
Extending its reach to awqaf could help unlock many billions of dollars of assets: According to a Dubai government estimate, awqaf hold around $1 trillion in assets globally.
AAOIFI did not give a time frame for the completion of its awqaf standards, but said its board had discussed and approved specifications regarding the accounting standards.
The plans are part of wider industry efforts to modernise awqaf, which receive donations from Muslims to operate specific social projects, such as mosques, schools and welfare schemes.
The management of assets by awqaf has often failed to keep up with their expansion, many being poorly managed and earning low to zero 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-maximising investment managers.
In India, awqaf are estimated to own 490,000 properties but their estimated annual income is just 1.63 billion rupees ($25.22 million.) ($1 = 64.6300 Indian rupees) (Reporting by Bernardo Vizcaino; Editing by Eric Meijer)