Article at a glance:

Rethinking regulation for Islamic banking

• Islamic banking is spreading well beyond its initial markets, in North Africa, the Middle East, and Southeast Asia. Attracted by a huge growth potential, multinational banks are creating their own Islamic wings. Meanwhile, some traditional Islamic banks are making forays beyond their borders.
• Regulators, however, are having difficulty balancing the religious obligations of Islamic banking and economic reality.
• Whether rethinking current policies or drafting new ones, regulators should create environments that promote improved Islamic banking services and products for customers, as well as foster a global industry that goes beyond national boundaries.
• Two areas—general licensing policies and the role of governments in overseeing compliance with the Islamic code, or Sharia—deserve particular attention.