Financial Sector Assessment Program for Islamic Financial System (iFSAP)

The FSAP, initiated by the IMF and the World Bank, has been implemented internationally including the IDB and IFSB member countries. The initiative is beneficial to further improve the quality of the financial industry as well as to contribute to global financial stability. The rapid growth of Islamic finance internationally poses new challenges to the supervisory authority particularly with the growing significance of the newly developed industry. Operationally, the development of the Islamic financial industry should fulfill certain criteria in promoting operational soundness and efficiency. The initiative on iFSAP is deemed very crucial for providing appropriate understanding on how the Islamic financial system can deliver benefits and how it is compatible with the international financial stability initiatives. The implementation of iFSAP in further instances may provide a developmental view to the financial authorities in particular countries operating by the Islamic financial system. To address this issue, the IRTI-IDB has been trying to formalize the contents of the iFSAP that are beneficial to complement the FSAP initiative so that the assessors of the FSAP would have a standard set of guidelines to carry out the initiative. This paper provides the methodology and the areas of the assessment in the iFSAP. © Author