The Securities and Commodities Authority (SCA) launched a strategy for Islamic capital market development. The strategy includes the supervisory role played by SCA (legislation and powers), the role played by self-regulatory organizations (SROs) (i.e. financial markets), and the challenges encountered.
SCA's role is to issue legislative regulations for the regulation and supervision of Islamic capital market products, such as shari'ah-compliant mutual funds, additional disclosures of Islamic products, shari'ah-compliant hedge contracts, provisions for agencies rating Islamic products, updates on sukuk and capital adequacy regulations through assigning weights to Islamic products, the launch of the sandbox initiative to stimulate innovation in Islamic financial markets, the introduction of shari'ah board governance system, the qualification of supervisory shari'ah board members, and the organization of training programs plus an integrated awareness program dealing with Islamic financial markets.
Markets' role, on the other hand, is to issue provisions regulating listing and trading securities and shari'ah-compliant hedge contracts; formulate shari'ah-compliant equity screening provisions; update existing clearing, settlement, and trading regulations concerning Islamic products; and develop investment indicators for Islamic securities.
It is worth mentioning that there are numerous challenges facing the Islamic finance market, including the high costs of Islamic contracts; the increased complexity of the composition of Islamic products (multiple contracts); the difference in perspectives and schools of Islamic law; the simulation of traditional instruments in the composition of Islamic products; the need for innovative, creative, and credible products that compete with conventional instruments; and the availability of trained and qualified human resources to create Islamic products that fulfill shari'ah purposes.
