Legal and Regulatory Issues and Challenges Inhibiting Globalization of Islamic Banking System

Arguably the Islamic finance system has become an accepted phenomenon in the international financial system. The recent unprecedented rapid growth of Islamic financial system is gradually changing the status of the Islamic banking system as an alternative to the conventional counterpart to a mainstream contender. Due to its universal growing acceptance and popularity many countries are embarking on legal and regulatory reforms to sustain the global development of the system. This has generated a lot of issues and challenges for sustainable growth of the financial system. Despite this, a supportive uniform regulatory and legal framework to enhance global integration of the system is yet to be developed. Therefore, considering the critical role of sound and robust legal and regulatory framework in the sustainable development of Islamic banking system, it is imperative to align the regulatory and legal framework in line with the development. The focus of this paper is premised around these issues and the challenges posed to the growth and sustainability of Islamic banking system.