Many of the issues have long been known, but have still not been resolved, despite much talk highlighting the challenges that need to be sorted out.
While the Shariah compliant market is still only a tiny portion of global money markets, as a sector it is growing fast.
In Saudi Arabia alone, some $390m of project finance was Shariah compliant last year, a growth of 27%.
Sukuk (Islamic bonds) was a $94bn market in 2007, with the UAE leading the way, accounting for $33bn, with Saudi Arabia the third biggest market, at $11bn (Malaysia, at $31bn, was second).
By 2017, the sukuk market is expected to be worth $676bn.
Industries leading the way in the Islamic project finance market include construction and waste water. But underlying this growth is the continuing problem that the industry lacks standardisation that can be transported for project finance deals either among business sectors or countries.
Mukhtar Hussain, Global CEO at HSBC Amanah, says the Islamic market could learn much from the conventional banking sector, with them contributing knowledge and advice on best practices. There is also a need to address the people gap, he told delegates at the Meed Islamic Project Finance conference in Dubai.
'In the financial services industry, never was there a better time to attract people into the industry to develop its growth,' he says.
Increase in market value
The importance of addressing this, and the need for better standardisation is important because, as he points out, the 'spending is only going to go in one direction. Values per project and values per market will only increase'.
He believes the industry needs to create an institutional framework in terms of judgements around Shariah, and he is not alone. Majid Dawood, CEO of Shariah compliance advisors Yasaar, says there is a need for vanilla offerings. 'There has to be standardisation and harmonisation of scholars…so that we have a level playing field and products that can be sold anywhere by anybody. When you have standardisation you can make it a global product.'
And once it's a global product, it will grow much faster.
Currently, with little standardisation, the process for approving that finance for a project is Shariah compliant is long, because each case has to start from scratch.
And that means securing finance can also be costly, which will put some companies off. But Dawood points out, the 'Shariah' cost is not that much. 'If we had standard documentation it would speed up the process and make it cheaper,' he concedes.
The barriers to global standardisation are the differing schools of thought combined with the various tax and legal differences between countries.
But Dawood does not believe it is an issue that will be difficult to resolve for the relatively young 40-year old industry, despite the fact that - as Hussain said - it has been lingering for many years.
'It's just a question of maturity and critical mass. As the industry grows that will come – it's a Catch 22 of which comes first, but they both have to come together at some point to grow the market. The faster the market grows, the more accepted it becomes, the more standardisation comes in,' he told AME Info. See also:Islamic finance booms in JordanShariah-compliant commodity trading gathers pace in Dubai