National and Global Islamic Financial Architecture:
Problems and Possible Solutions for the OIC Member Countries
10
financial sector that may not be covered by the conventional architectural institutions and
require specific attention. The elements of the Islamic financial architecture that need special
attention and are discussed in this study can be classified into seven categories as identified
below:
Legal Infrastructure: Existence of supporting Islamic finance laws, tax regimes impacting
Islamic finance, dispute settlement/conflict resolution framework and institutions, and
resolution of banks.
Regulation and Supervision Framework: Appropriate regulatory and supervisory frameworks
for Islamic banks, takaful and Islamic capital markets including the presence of separate
regulatory departments/units dealing with Islamic financial sectors. Rules related to the
nature of the Islamic financial industry and the existence of Islamic windows/subsidiaries in
conventional banks.
Shariah Governance Framework: Existence of regulatory standards for Shariah governance and
whether Islamic financial institutions are required to use IFSB/AAOIFI Shariah governance
guidelines of AAOIFI Shariah standards. Determine the role of central national Shariah board
(if it exists) and its responsibilities and scope.
Liquidity Infrastructure: Status of liquidity management framework (markets and
arrangements) and liquidity management instruments and products for Islamic financial
institutions. Need for Shariah compliant LLOR facilities and instruments that Islamic banks can
use.
Information Infrastructure and Transparency: Requirements to use either AAOIFI
accounting/auditing standards or domestic standards adapted to Islamic finance. The legal and
regulatory framework of the country related to transparency and disclosure for IFIs. Existence
of organizations providing credit ratings for sukuk issuance and Shariah ratings of Islamic
financial institutions.
Consumer Protection Architecture: Laws/regulations related to the protection of consumers of
the financial sector in general and Islamic financial institutions in particular and institutional
mechanisms/arrangements to address the unfair treatment of consumers. Deposit insurance
scheme for depositors of Islamic banks in the country. Scheme for financial literacy in the
country and if there are any specific schemes for Islamic financial consumers.
Human Capital & Knowledge Development Framework: Adequate personnel to cater to the
needs of the Islamic financial sector at different levels (such as regulatory bodies, IFIs, law
firms, etc.). Existence of public and private educational/academic institutions to enhance the
knowledge and skill levels for the Islamic financial sector.
1.3. Methodology
1.3.1. Sample Countries
The study includes the case studies of 12 OIC countries. Different criteria are used for choosing
countries as case studies. First, there is regional diversification to ensure that there are
countries from three regions of the OIC (i.e., Africa, Arab and Asia). Secondly, as the financial