Absence of sukuk tax legislation in non-Muslim nations to blame.
CIMB Group Holdings Bhd said the US$1.6 trillion global Islamic finance industry is growing at a third of its potential as a result. It noted that shariah-compliant assets account for less than 2% of conventional equivalents.
CIMB said efforts in South Korea, Australia, France and the U.K. to approve regulation have come to a halt. Opposition from political and religious groups has prevented some nations from embracing banking that complies with the Koran’s ban on interest, CIMB said.
It added that if the rules and regulations to make Islamic finance as accessible as the conventional market are in place, there’s no reason why it cannot grow at least three to four times the pace of today.
Some countries with Islamic regulations such as Singapore are also reluctant to sell shariah-compliant securities because the conventional market is more developed and issuers are more comfortable with such bonds. The shariah debt market is dominated by Malaysia, Indonesia and the six-member Gulf Cooperation Council, which includes Saudi Arabia and the United Arab Emirates.
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