Islamic finance represents less than 1% of global market and 'is not punching its weight.'
Islamic finance will need to move beyond the retail market and develop its capital markets globally to compete better with conventional finance, an official from consultancy Deloitte said on Thursday.
Daud Vicary Abdullah, global leader of Deloitte's Islamic finance group told reporters in Dubai at the launch of the firm's Middle East Islamic finance leaders survey that international markets such as Japan and London are actively trying to raise sharia-compliant capital in order to tap liquidity from the Gulf region.
He said: "Islamic finance still represents less than 1 percent of the global market. It's not yet punching its weight."
Abdullah said that the economic power is moving further east and currently in the Middle East region, with $600 billion of the $1 trillion Islamic finance industry is coming from the Gulf Cooperation Council.
For that reason, more interest is coming out of markets such as Canada, China and Brazil to explore the possibility of launching sukuk.
He said: "The fuel for growth is not about the retail side but about the big ticket items such as project financing and raising funds."
He said Deloitte is working with three major financial Japanese financial corporations to raise Islamic funds outside of the domestic market and is also working on Islamic finance projects in Italy, Germany and Luxembourg.
But the Islamic finance industry will need to address concerns over accounting standards and risk management, the Deloitte survey found, if it wants to reach its growth potential.
The survey found that 61 percent of those questioned, believe that there must be more regulation over accounting standards and risk management in the industry.
Still regulation within the industry is considered inconsistent in different parts of the region given wrangling over Islamic law among scholars and a lack of enforceable standards across the Gulf.
The survey found that more than half of respondents supported the creation of a single sharia supervisory council in any one jurisdiction, similar to the models implemented in Malaysia, Sudan and Pakistan.
"A GCC (gulf cooperation council) move to a national sharia council or super-GCC sharia council" would help influence global standardization and make the industry more competitive, Abdullah added. (Reuters)