National and Global Islamic Financial Architecture:
Prolems and Possible Solutions for the OIC Member Countries
11
architecture will partly depend on the legal regimes, countries are chosen so that there is
diversity in their legal systems. Legal regimes can be broadly classified as those that are based
on Islamic law, common law and civil law. The third criterion is the size of the Islamic financial
industry. Countries with larger Islamic financial sectors will provide an indication on the
financial architecture under which the industry has evolved. Given the above criteria, the
countries included as case studies for the study are shown in Table 1.1.
Note that all countries in the table, except Nigeria and Oman, fulfill the different criteria
identified above. These two countries are added as Islamic finance has emerged there
relatively recently. The reason for the inclusion of Nigeria where Islamic finance started in
2011 is to increase the number of countries from the African region to two. Oman is also
added as a new entrant with good potential of growth due to its sound legal and regulatory
infrastructure. Since the inception of the first Islamic bank in 2013 in the country, its share
has already jumped to 4.4% of the total banking assets.
Global financial centers chosen for the study are based on their importance and size on the
one hand and their potential to develop Islamic finance on the other hand. The countries
examined are UK, Germany, Luxembourg, Hong Kong and Singapore. Note that instead of
discussing the global financial centers as cities, the study examines countries where these
centers are located. This is because, for example, while Islamic financial activities in the
international financial center of Frankfurt is very small, Munich is nevertheless host to some
large insurance companies that also deal with retakaful. By discussing the non-OIC global
financial centers in terms of countries, the market segment in Munich can be added. Similarly,
Islamic retail banking (AlRayyan Bank) in the UK is headquartered at Birmingham. Thus,
expanding the scope of case studies to the country level will enable us to capture Islamic
finance at a broader scale.
Table ‎1.1: List of Countries to be used as Case Studies
Countrya Region Legal System
Familye
Size of IF sector:
% National
Banking Assets
Size of IF sector:
Global share of IF
assets
1. Bangladesh Asia Common Law 17 1.34
2. Egypt Arab Civil Law 4 b 1.17
3. Indonesia Asia Civil Law 4.6c 1.39
4. Malaysia Asia Common Law 21.9 9.56
5. Nigeria Africa Common Law N.A. N.A.
6. Oman Arab Civil Law 4.4d N.A.
7. Pakistan Asia Common Law 9.8 0.75
8. Saudi Arabia Arab Islamic law 51.3 18.57
9. Senegal Africa Civil Law N.A. N.A.
10. Sudan Arab Islamic Law 100 1.00
11. Turkey Asia Civil Law 5.7 3.2
12. UAE Arab Civil Law 17.4 7.36
a-All data for 2014H1 (source IFSB 2015) except otherwise indicated; b-Data for 2012 (source SESRIC 2012);
c-Data for 2015 (Source Tampubolon 2015); d- TR, IRTI and CIBAFI (2015). e-World Bank (2004). Note that
the countries are classified according to legal origins such as English, French, German, etc. While the English is
considered common law, the continental European legal systems belong to civil law regimes. The World Bank
does not include Islamic law as a category. This category is added for Saudi Arabia and Sudan as these
countries have Islamic legal systems.