Islamic Banking Infrasrtucture

International Islamic Rating Agency (IIRA)

The International Islamic Rating Agency (IIR) is a specialized agency in rating Islamic banks and financial institutions and determining the extent of their dependence on traditional international financial institutions. Its role is therefore complementary to Islamic financial activities because it evaluates Islamic financial institutions and their products.

The International Islamic Rating Agency is one of the oldest Islamic Rating institutions, launched in 2006 from the Kingdom of Bahrain, and was founded by a number of Islamic banks and credit rating institutions, led by the Islamic Development Bank (IDB), with the aim of serving the Islamic financial and banking sector through Providing an independent rating of the activities and products of this sector for the benefit of investors and individuals.

The International Islamic Rating Agency offers two types of Rating :

  1. Credit Technical Rating: intended to demonstrate the financial strength and solvency of the Islamic bank and its products.
  2. Sharia Rating : The purpose of which is to highlight the extent to which the Islamic bank or its products complies with the Shariah requirements and abide by the directives of its Shariah board.

The International Islamic Rating agency was established as a Bahrain-based shareholding company with an authorized capital of $10 million at the invitation of the Islamic Development Bank in Manama in 2000. The bank owns 42% of the agency’s capital and the remainder is divided into the following form:

  • 11%: Bahrain Islamic, Kuwait Finance House, Abu Dhabi Islamic Bank, and Takaful Malaysia.
  • 5%: Al Baraka Islamic Group.
  • 5.3%: The Company “GCI” is owned by the Pakistani classification.
  • 2%: The Cyprus capital of Antwerp.
  • The remainder is distributed among a number of companies, financial institutions and rating agencies.

The agency was established to carry out research, analysis and evaluation of shares, securities and instruments, to or on behalf of government authorities or companies registered in Bahrain or abroad, to enable their use by any person or entity, including investors, insurance companies and agencies.

The agency therefore aims to:

  1. Classification of public and private entities.
  2. Conduct an independent evaluation and express an opinion on possible future losses of the categorized entity.
  3. Independent evaluation of the extent to which the entity or financial instrument is in conformity with the principles of Islamic Sharia.
  4. The transmission of data and information to help develop the Islamic capital market.
  5. To be an effective tool for introducing standards that achieve greater disclosure and transparency.
  6. To contribute to the promotion of the international Islamic capital market and Islamic financial instruments.
  7. To strengthen the infrastructure of the Islamic financial market in order to give strength and transparency to the work of Islamic financial institutions and enable them to assess the extent of the risks they face.
  8. Developing Islamic banking and making its products more acceptable globally.

Based on the foregoing, the International Islamic Rating Agency aims to help Islamic banks develop their business and put their bonds on the international market, after they have been able to obtain an international rating by this agency, especially with foreign banks. IIR also gives the required transparency to the work of Islamic financial institutions and enables them to assess the extent of the risks they face.

In order to make the agency’s rating internationally accredited, the International Islamic Rating Agency seeks to recruit global rating agencies such as Standard & Poor’s or Moody’s to have a role in the agency, either as shareholders or as advisors, in order to support their ratings, benefiting from their names as international rating agencies.

The agency seeks to obtain recognition of its ratings by the actors of the sector, where it received official recognition from the central Bank of Bahrain as the External Credit Assessment Institution. The agency is also listed on the list of rating agencies approved by the Islamic Development Bank.

The main sponsors of the International Islamic Rating Agency are the Jeddah-based Islamic Development Bank and the Islamic Foundation for private sector development, as well as large regional institutions such as the Abu Dhabi Islamic Bank, the Islamic Bank of Bahrain, and the Dubai Islamic Bank.

The structuring of the International Islamic Rating Agency was carried out in a manner that preserves its independence, as it has a board of directors that is completely independent of the rating committee, for greater transparency and credibility.

The aim of the establishment of International Islamic Rating Agency is clear and simple, the establishment of a rating agency such as Moody and Standard & Poor’s, which specializes in providing consultancy and services to Islamic financial institutions and products. In this regard, the Agency looks forward to being the final reference point for the credit rating in accordance with the principles of Islamic Sharia.

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