On November 22, 2011, Thomson Reuters announced the launch of the Sharia-compliant Islamic Interbank Benchmark Rate (IIBR) to provide an objective indicator for the average expected return on Sharia-compliant short-term interbank funding and financial instruments. The IIBR was created as an alternative to the interest-based index LIBOR, which violates riba, the Sharia principle that prohibits the payment of interest. Although LIBOR violates Sharia, it was reluctantly permitted by some Sharia experts because there was no other alternative. In contrast to LIBOR, the IIBR uses expected profits from short-term money and a forecasted return on the assets of the bank receiving the funds. These amounts are considered returns on investments and not interest on loans, and therefore are acceptable under Sharia. However, other Sharia experts have questioned whether this alternative is necessary because in Sharia-compliant transactions, LIBOR is just a number that is referenced to determine a return rate and not to calculate interest.

According to Thomson Reuters, the IIBR can be used to price a variety of Islamic instruments, including:

The IIBR uses the contributed rates of 16 Islamic banks and the Islamic sections of conventional banks. It was established in cooperation with the Islamic Development Bank, Accounting and Auditing Organisation for Islamic Financial Institutions, the Bahrain Association of Banks, the Hawkamah Institute for Corporate Governance and several major Islamic banks. The IIBR will be overseen by the Islamic Benchmark Committee of more than 20 Islamic finance institutions and a Sharia committee consisting of four world-respected Sharia scholars.

For more information on Islamic finance and Sharia-compliant financial instruments, see Practice Notes, Islamic Finance: US Law Overview and Islamic Finance Structures and Products. For more information on Islamic finance in the UK, see Practice Note, Islamic Finance: UK Law Overview.