He said without such a policy and the concomitant enabling legislation and regulatory framework, the progress of the Islamic finance industry will continue to be tentative and fragmentary-based more on a “rhetoric aspiration” rather than on the substance of policy, law and regulations.
“It is imperative therefore that the governments and legislators in these jurisdictions have the will and commitment to undertake the necessary measures to facilitate the development and operationalisation of Islamic finance,” he said.
He said this at the The Securities Commission Malaysia (SC) and the Oxford Centre for Islamic Studies (OCIS) co-hosted 7th Roundtable on Islamic Finance here.
Sultan Nazrin said effective public policy and legislation are vital, especially in enabling recognition of the contracts applied to financing mechanisms, of profits as alternative to interest charges and of the legal constructs to take into consideration the Shariah needs.
Indeed, even in non-Muslim jurisdictions that have enabled Islamic finance transactions, the government had taken the necessary policy stance and adopted the relevant legislative measures to facilitate the development of Islamic finance in their markets.
“Irrespective of the approach, it is evident that strong policy commitment is a pre-requisite to having an ecosystem conducive for Islamic finance,” he stressed.
In Malaysia, he said, the long-established public policy commitment towards the development of Islamic finance has been instrumental in positioning the country as a vibrant international centre for Islamic finance.
Coordinated execution of the policy is reflected through inter-alia the formulation and implementation of facilitative legislation, regulatory and supeervisory framework, Shariah governance framework and incentive regime for the three main segments of Islamic finance, namely Islamic banking and takaful.
Elsewhere, the UK government has led the way in being the first non-Muslim country to issue sovereign sukuk in 2014, he said.
“While the road ahead is long and arduous, with the strong commitment and involvement of all relevant stakeholders ranging from the government to consumers, I am confident that Islamic finance can become increasingly prominent component of the global financial system that will also promote greater stability, inclusiveness and equity,” he added.
Published on: March 5th, 2016