Universal harmonisation of sharia interpretation is possible although market demands require the use of debatable structures for now, the Islamic Bank of Thailand said on Monday.Islam, which is the basis of sharia finance, has different schools of thought, leaving religious scholars divided on the validity of certain contracts and resulting in a fragmented industry.
However, some religious scholars and industry practitioners say complete harmonisation is neither achievable nor desirable as it would stunt the sector's ability to innovate.
"We still use the bai inah and bai al dayn (structures) which are not acceptable by the Middle East," Islamic Bank of Thailand President Dheerasak Suwannayos told Reuters on the sidelines of a conference in the Malaysian capital.
"Why do we still continue to use that? Because the needs of the people in different societies are not the same."
He said the bank applied the bai inah structure in Islamic microfinance "because the poorer people, what kind of asset could they sell to us?"
The bai inah (sell and buyback contract), bai bithaman ajil (deferred payment sale contract) and bai al dayn (debt trading contract) are very popular in Malaysia but not fully accepted in the Middle East.
These three contracts account for over 80 percent of the Islamic banking portfolio in Malaysia, according to Maybank Investment Bank. "There should be a so called product which is saleable in one area and acceptable and saleable in another area...It will take time," Suwannayos said.
Islamic Bank of Thailand, which is the country's only sharia bank, plans to increase its network to at least 56 branches within two years from 26 now, he said.
Only five percent of Thailand's population is Muslim but the authorities plan to launch an Islamic stock index soon to capitalise on growing demand for ethical investments. (Reuters)