Publication:
Regulatory Environment & Institutional Framework
Abstract
A comprehensive governance, regulatory and supervisory framework is required for the
financial market to operate on a sound footing. The presence of a conducive and efficient regulatory
environment not only helps promote market stability but also adds to the confidence and trust of the
investors, public and other stakeholders. Since the inception of the Islamic finance industry, domestic
regulators and international standard-setting bodies have strived to develop suitable regulatory
and governance frameworks that cater for the unique nature and specific risks of Islamic financial
institutions (IFIs). Regulators have been instrumental in supporting the development of the industry via
ensuring clarity through appropriate regulations, gradual harmonisation of industry standards, robust
Shari’a governance frameworks and a supportive legislative infrastructure. These measures, which are
underway in Asia, the Middle East, Europe and even in sub-Saharan Africa lately, are critical for the
smooth and sustainable expansion of the industry. Despite this, variations in Shari’a interpretations
and differences in the Shari’a governance frameworks can result in legal uncertainties and hamper the potential growth prospects of the industry by decreasing stakeholders’ confidence. Therefore,
the efforts by international organisations like the Accounting and Auditing Organization for Islamic
Financial Institutions (AAOIFI), the Islamic Financial Services Board (IFSB) and the International
Islamic Financial Market (IIFM) in terms of standardisation and harmonisation of the Shari’a
governance, Shari’a interpretation and market practices are key for the sustainability of the industry
Keywords
Citation
Muhammad, M. (2024), "Regulatory Environment & Institutional Framework" in Global Islamic Finance Report 2024, Cambridge Institute of Islamic Finance
Publisher
Cambridge Institute of Islamic Finance