National and Global Islamic Financial Architecture:
Prolems and Possible Solutions for the OIC Member Countries
229
Table ‎8.3: Summary Status of Activities in Global Financial Centres
Activities UK Germany Luxembourg Singapore Hong Kong
Retail Banking Yes Yes No Yes No
Wholesale Banking Yes No No Yes No
Takaful/Retakaful Yes No No Yes No
Funds Yes No Yes Yes Yes
Sukuk Yes No Yes Yes Yes
Education/Training
Programmes
Yes Yes Yes Yes No
8.4. Concluding Remarks
A financial system performs certain core functions in the economy that contribute to growth
and development. The future growth of Islamic finance will depend on two key interrelated
factors: the levels of demand and the capabilities of financial sector satisfy the demands of
different stakeholders. Given that the financial sector is complex and one of the most regulated
industries, the ability of the financial sector to provide financial services will partly depend on
supporting infrastructural institutions. Appropriate infrastructural institutions are needed to
reduce the risks and vulnerabilities that can potentially lead to harmful and costly economic
downturns. Compliance with the Shari’ah introduces some unique risks in Islamic financial
institutions that may need specific attention. Supporting architectural institutions will become
important for the future growth and expansion of the Islamic financial sectors in the future.
As establishing the financial architecture is the prerogative of state institutions, the case
studies show that financial architectural environment under which Islamic financial sector
operates can be distinguished as facilitative and market driven. In the former, the government
and public bodies take an active role in providing supportive infrastructure framework. In
countries that do not have supportive legal and regulatory environments, the industry is
market driven and has to adjust its operations to laws and regulations. This not only affects the
type of products that the Islamic financial sector can provide but also introduces legal risks and
limits the growth of the industry. At the national level, the governments can introduce
supportive infrastructural institutions.
Moving forward, this study has identified some of the financial architectural elements that
need to be strengthened for the development of the Islamic financial industry. While the study
has identified the architectural elements that need to be strengthened, their development
would require in-depth work to come up with appropriate detailed solutions and models.
Different international Islamic infrastructure organizations can play a supporting role in this
regard by providing standards, guidelines, principles and templates that different countries
can use. These organizations can also collaborate with their conventional counterparts to
further enhance cooperation and provide the necessary tools for the sound and robust growth
of Islamic finance globally. Although these institutions have published various standards and
principles, their adoption by OIC MCs will depend on relevant public authorities in general and
regulators in particular.
The future growth of the Islamic financial sector will also depend on the demand for its
products and services. Significant parts of the growth in demand will come from Muslims who
opt for Islamic finance due to religious reasons. For this captive market, mitigating Shariah
compliance and reputational risks is important for further expansion in the future. Islamic