The uncertainty and disparity in some areas of Islamic finance can at times be an added cost for industry players or turn them away from it, said a senior Securities Commission (SC) director.
Zainal Izlan Zainal Abidin, the SC executive director, said the legal, regulatory and tax frameworks for Islamic finance sometimes differ from one market jurisdiction to another, and this poses a challenge when one goes into cross border situations. (source)
"As a result, going through the Islamic finance route may, at times, be less clear or economical than the conventional route.
"Until these issues are satisfactorily addressed, there will be some degrees of apprehension among industry players and practitioners to fully embrace Islamic finance," he said.
Zainal Izlan said this in his welcome remarks at the SC's 6th Islamic Markets Programme (ILM) workshop titled "The Role of Regulation in Overcoming Challenges in Developing Islamic Markets" here yesterday.
He noted that achieving greater harmonisation in interpretation of syariah principles represents a major challenge for the industry.
The differences in opinion may not be that prevalent but without complete harmonisation, it does affect the industry's efforts to build up scale in terms of product development, distribution and expertise and cost efficiencies.
"Efforts to truly globalise Islamic finance through cross-border transactions and offering of products and services are also being hampered," Zainal Izlan added.
He said the Islamic finance industry is also challenged by the lack of human capital with the relevant skills.
This, he added, has limited the pace of innovation and expansion of Islamic finance products.
The ILM is an annual programme by the SC and is designed to cater to senior regulators and participants in Islamic markets.
The aim is to explore current and future developments in Islamic markets as well as to examine the risks and challenges.
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