Question

Standardization in Islamic Banking is required to reduce confusion. Discuss the confusion.

Answer 1

Due to the absence of truly global Islamic financial system, the continued growth and development of islamic banking and finance is somewhat haphazard. After more than 30 years in existence, Islamic financial markets remain segmented and differ considerably across nations.

The romoval of legal obstacles does not seem to have received due attention so far from regulatory authorities in most of countries. The analysis show that the laws with respect to financial institutions are formulated in these countries is an image of conventional banking before the initiation of Islamic finance.

The other aspect of legislation pertaining to Islamic bank is that most of the legislation do not specify point of reference for contentious issues such enforceability. For instance, many countries are governed by the common law with the exception of few. This put firms using the Islamic modes of finance as well as Islamic bank at a disadvantage. The integation of these two traditions is really necessary in the context of Islamic banking and finance.

To bridge this gap as well as to improve and adopt best practies, following rocomendations iven to the authorities -

• Instituting appropriate legal framework
• adopting standards set by institutions such as AAOIFI ans IFSB
• proper complience audit framework and external audit program
• ensuring tax neutrality and exemptions

Standardisation, a long standing issue in Islamic finance, should be addressed properly to avoid damages to consumer confidence in the retail sector and confussion in the corporate sectors.

Standardisation is required in Islamic banking and finance to ensure further growth across the globe.