The $1.5 trillion Islamic finance industry needs a global set of standards if the sector is to significantly expand from its current status as a relatively small portion of the world’s financial arena, a bank executive has said.

Standardisation of regulations is an essential prerequisite for stronger growth, Hussain AlQemzi, group chief executive of Noor Investment Group and CEO of Noor Islamic Bank, was quoted as saying according to CPI Financial, a website. He spoke at a DIFC hosted conference on the future of Islamic finance, jointly organised by Noor and Thomson Reuters.

Islamic finance – characterised by its structures to deal with the strictures of Shariah law, such as the ban on interest and gambling – varies between jurisdictions in terms of how rules are interpreted. Some jurisdictions, such as Saudi Arabia, are more conservative in their application of the laws than in other places, such as Indonesia.

There continues to be development in the Asia region. In late May, Gatehouse Bank, the UK-based but Kuwaiti-owned shariah compliant bank, opened a representative branch in Malaysia. Last September, BNP Paribas Malaysia Berhad and INCEIF, The Global University of Islamic Finance, rolled out a joint centre for wealth management to tap perceived rising demand in the Asian country.

Despite such activity, AlQemzi said there were reasons for concern.

“It is a real concern that there is no authoritative global body to regulate and promote Islamic finance, AlQemzi is quoted as saying. “Disagreement and different interpretations, over what is Sharih compliant and what is not, continue to make it difficult to establish the necessary regulations for the industry to develop globally accepted products,” he said. “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.

Even in Muslim countries, conventional finance has a larger market share than Islamic finance. For example in Malaysia, AlQemzi reportedly said, Islamic lending accounts for just 26.6 per cent of overall lending. While in the UAE, Islamic finance accounts for only 12 per cent of the financial sector.

AlQemzi called for practical measures to be implemented that progressively address impediments to the growth of Islamic finance.