Major Challenges Facing Islamic Capital Market

Islamic banks have battled for a fourth of a century, increasing some achievement yet
confronting a few issues. It is, maybe, an opportunity to check out the difficulties they
face, particularly that they will before long be introduced another thousand years. This
difficulty will be isolated by two section which is in Institutional aspect (Institution
framework, Appropriate Legal Framework, policies and procedures) and Operation
aspect (Competition, Sharia, Teaching, Training, Research and Development).

Building Proper Institutional Framework

Each framework has its institutional prerequisites. Islamic banks alone can't cook for the
majority of their institutional prerequisites which should give elective available resources
to addressing the requirements of investment, customer fund, short term capital, long
term capital, and so forth. Various commonly supporting foundations/game plans are
expected to perform different capacities. These incorporate security markets, investment
banks and equity foundations, for example, benefits plan, mutual fund and so on. Indeed,
even inside the business banking field, various supporting institutional game plans, for
example, moneylender of the final retreat, insurance and re-insurance offices and so forth
should be built up. Building an appropriate institutional set-up is maybe the most genuine
test for Islamic fund. To confront this test, an "utilitarian methodology" towards structure
this set-up ought to be embraced. The capacities being performed by different
foundations in the regular structure ought to be inspected and endeavors ought to be
made to set up organizations that can play out those capacities in an Islamic rules.

Appropriate Legal Framework, Policies and Procedures

The business, banking and company laws in a large portion of the Islamic nations are
designed on the Western example. Those laws give a fairly tight extension to Islamic
financial activities. While gatherings can structure their understandings as per an Islamic
contract, the authorization of those understandings can be high-cost. Those conditions,
among others, require that extraordinary laws for the presentation and routine with
regards to Islamic banking be set up. It is important to order a few laws to encourage the
task of a blended framework. In this regard, one significant arrangement issue is the
treatment of profits for the motivations behind deciding tax liability. Under the conventional
framework, interest paid by organizations is treated as a duty deductible cost.
Comparative treatment must be given to the dividend paid out by financial institution.

Increased Competition

Islamic banks have succeded in preparing huge amount of assets. In any case, it will
require significantly more strenuous endeavors to keep up a sensible rate of development
in future. There are a few purposes behind that. Firstly, it must be understood that a
significant part of the stores now with the Islamic banks came not because of the
fascination of higher returns or better administrations but since of religious duty of the
customers. Huge numbers of them were keeping their investment funds in regular banks
without taking any enthusiasm on them and numerous others were keeping them in
private safes. For every single such individual, a modest return or even no arrival from
Islamic banks, was adequate. The vast majority of this cash has officially discovered its
way into the coffers of Islamic banks. Along these lines, this source has been nearly
evaporated. Also, so far Islamic banks had a genuinely huge level of 'restraining
infrastructure' over the budgetary assets of Islamically spurred open. This circumstance
is evolving quick. Islamic banks are presently confronting regularly expanding challenge.
A significant advancement in Islamic banking over the most recent couple of years has
been the passage of some conventional banks including some major worldwide Western
banks in that showcase. This advancement is an unmistakable acknowledgment of the
practicality of Islamic banking as an elective model and yet, it has expanded the
competition. Does it betoken well for the fate of Islamic banking? The appropriate
response will rely upon how the Islamic banks respond to this improvement. As a rule,
rivalry should be useful for the development of any industry. It forces an inefficient firms
to either take care of business or shape out. It diminishes the expenses and improves
administrations to shoppers. It advances development and acquires enhancements item
quality. The conventional banks, especially the western banks have a huge bit of leeway
over Islamic banks as far as their size, involvement, showcase inclusion and long stand
in the market. This uncovered the Islamic banks to an extraordinary challenge.
Shari'ah Aspects

On account of the religious component of Islamic banking and finance, no new

product/services can be embraced until it is cleared by shari'ah researchers. Indeed, even
after another product/services is put into utilization, shari'ah inspecting of the activities of
monetary foundations is critical to guarantee that the genuine practice conforms to the
necessities of shari'ah. This is significant for religious reasons as well as for simply
business contemplations in light of the fact that the customers of Islamic banks won't
believe in their tasks except if shari'ah researchers clear their exercises. In this
foundation, the skill of fiqh researchers in comprehension the pre-requirements of present
day financial products and in assessing these items turns out to be significant. Practically
all Islamic banks have their very own shari'ah sheets or shari'ah counselors. The past
record demonstrates that shari'ah bodies have completed an admirable occupation in
assessing the utilizations of conventional contracts and defending against the utilization
of a few and the abuse of others. Be that as it may, with regards to assessing modern
financial contracts or Islamic substitutes for them, shari'ah bodies have discovered it very
hard to issue decisions. This is essentially because of an intense deficiency of
researchers with double specialization or possibly working information of present day
account and shari'ah in the meantime. There is an urgency need to build the supply of
researchers with double specialization

Teaching, Training, Research and Development

Educating, training and research are the where-with-just for the improvement of any
control. This is all the more so for a control like Islamic banking and fund, which is as yet
developing. As referenced above, there is a genuine lack of researchers who have even
a working information of both Islamic fiqh and current financial aspects and finance.
Essentially, the vast majority of the Managers of Islamic banks are not very much
prepared in the utilization of Islamic methods of finances. An organization is the thing that
its workers make it. Along these lines, it is critical to have the general population with the
correct sort of aptitudes and promise to run the Islamic banks. Another significant
segment for helpful and logical research is the accessibility of bona fide data. This has
not gotten much consideration from Islamic banks. There is no reliable information
arrangement on the exercises of Islamic banks for a sensible number of years accessible
anyplace. What small amount data is accessible, is likewise subject to various
capabilities. Tragically, almost no exertion has been made to meet these prerequisites.
Neither the Islamic banks as a gathering nor any of the individual Islamic banks spend
any sizeable sum on research and development. There is a need to build endeavors here
to a few times the present dimensions.

References

 Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Sukuk Summit
2007, "The Challenge for a Global Islamic Capital Market – Strategic Developments in
Malaysia", London, 20 June 2007.
 Malaysian Islamic Capital Markets”, bi-annual bulletin of the Malaysian Islamic Capital
Markets, July-December 2012, Vol. 7, No. 2, Securities Commission of Malaysia, Kuala
Lumpur
 Retrieved from https://www.nst.com.my/news/2016/04/139794/islamic-bankings-
challenges-and-goals
 Prospects and Challenges in the Development of Islamic ... (. Retrieved from
https://www.ifsb.org/docs/2014-05-12_Prospects and Challenges in the Development of
IF.pdf