Standardisation of the regulations governing Islamic finance is must to ensure the globalisation of Islamic finance, according to Hussain AlQemzi, group CEO of Noor Investment Group and CEO of Noor Islamic Bank.
Speaking at a DIFC hosted conference on the future of Islamic finance, AlQemzi said although regional standardisation bodies exist, adherence to their standards varies from country to country and region to region.
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"It is a real concern that there is no authoritative global body to regulate and promote Islamic finance," AlQemzi said.
"Disagreement and different interpretations, over what is Shari’a compliant and what is not, continue to make it difficult to establish the necessary regulations for the industry to develop globally accepted products.
"Some people argue that standardisation is an unrealistic goal, given the fragmented nature of Islamic finance. I do not agree. There is a need for balanced, globally accepted, regulation that does not impede growth, or allow for abuse," AlQemzi added.
Industry estimates put the value of the Islamic finance sector at US$1.5 trillion, little more than 1% of the overall global financial sector. And, despite impressive annual growth rates of 15% to 20%, AlQemzi said there is no real tangible evidence that Islamic finance is a world force.
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By GlobalDataEven in Muslim countries, conventional finance has a larger market share than Islamic finance. For example in Malaysia, AlQemzi told delegates, Islamic lending accounts for just 26.6% of overall lending. While in the UAE, Islamic finance accounts for only 12% of the financial sector.
Al Qemzi called for practical measures to be implemented that progressively address impediments to the growth of Islamic finance.
"We need to create an enabling environment for cross border connectivity through Islamic finance," he said. "This will require measures to develop domestic capital markets and should go hand-in-hand with national market reforms, based on common international standards.
"Domestic markets should also be strengthened by widening the issuer and investor bases, with more issuances in currencies other than the domestic currency, to attract investors from across the globe.
"And there should be greater collaboration and cooperation among, and between national economies in which Islamic finance participates," AlQemzi added.
