ANALYTICAL STUDY OF THE IMPLEMENTATION OF AAOIFI’S ETHICAL STANDARDS IN THE ALGERIAN ISLAMIC BANKING SYSTEM: ASSESSMENT AND RECOMMENDATIONS

Abstract

Purpose — The application of ethical requirements is an important means for all stakeholders in the Islamic finance industry to build trust and promote integrity. This study aims to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Design/Methodology/Approach — This study utilises the descriptive approach to present the study’s variables and employs the analytical approach to discuss the various concepts and legal regulations that govern the banking sector so that it can provide recommendations that would help to build a solid foundation for the Algerian banking system. Findings — The findings revealed that the Algerian monetary authority is committed to gradually promoting Islamic banking regulations in a thoughtful manner. However, the study also found that there is a lack of clarity regarding the adoption of regulatory laws in Algeria for the ethical standards issued by AAOIFI, even within the 2023 Monetary and Banking Act. Originality/Value — To the best of the authors’ knowledge, this paper is the first study to assess the extent to which the Algerian banking system has adopted the ethical standards for Islamic financial transactions issued by AAOIFI. Research Limitations/Implications — The primary limitation of this research is its exclusive focus on the Algerian banking system and its reliance on secondary data. As such, the study’s focus is on the adoption of ethical standards within the Algerian Islamic banking system and not at the level of individual Islamic banks. Practical Implications — This research offers valuable insights for those in decision-making roles. It recommends the establishment of a committee of experts to develop standards tailored to the Algerian Islamic banking environment. The committee should be financially independent and under the supervision of the monetary authority. Additionally, the study suggests the issuance of a code of ethics to govern the professional conduct of Islamic banks (IBs) and Islamic financial institutions (IFIs) in accordance with Sharīʿah.