The deputy governor of Malaysia has said that other countries can learn from the Malaysian system of operating Islamic finance, believing the country is developing “laws of choice” for international centres.
Speaking at the joint International Shari’ah Research Academy for Islamic Finance and Institute of Islamic Banking and Insurance in London yesterday, Dato’ Muhammad Ibrahim said that the Islamic industry is currently worth over $1tn (€0.77tn) with more than 300 institutions operating it worldwide.
He believes that with the method of finance, which places a focus on ethical investing and risk-sharing, becoming increasingly global that it is “critical” that a legal framework for Islamic finance is internationally facilitative.
Ibrahim pointed to the Central Bank of Malaysia Act of 2009, which enacts separate laws for banking and Islamic industry and assigns a judge to preside over litigations to ensure the sanctity of contracts, as a structure that is “unique” to the industry.
“This approach has proven to be successful and critical in instilling public confidence in the Shariah integrity of the industry.
“Whilst enacting a separate governing law avoids the trap of confining the scope and operation of Islamic finance within the mould of conventional finance, this approach has proven in Malaysia to be the most efficient way possible to regulate Islamic finance.”
He noted that Ireland and France have recently made “significant steps” towards facilitating Islamic finance, while believing that Australia, Jordan and Lebanon are all working towards reviewing their legislations to be accommodative to Islamic finance.
Ibrahim also praised the initiative to establish a Law Harmonisation Committee with the aim of creating laws that are “facilitative, contemporary, and easily enforceable”, which be believes will lead to Malaysian regulations being “laws of choice” for the industry.
“This initiative is consistent with our continuous effort to foster an efficient, innovative and competitive Islamic financial system, given the more globalised and liberal operating environment within which Islamic finance will operate”, he said.