As part of its mandate, the Committee undertakes an objective review on the legislation and proposes the necessary amendments on existing Malaysian laws which are applicable to execute the whole chain of Islamic financial practices. Since its inception, the Law Harmonisation Committee has reviewed seventeen (17) laws in Malaysia and identified the areas that require legislative amendments so that Islamic financial transactions can be conducted in the most legally efficient manner. The work of the Committee will continue to remain relevant as the Islamic financial markets continue to expand and develop new products and business models. This mandate of the Committee will not only ensure that non-Shariah compliant elements in the legal provisions are harmonised, it will also ensure that our laws are facilitative to Islamic financial transactions. Another major milestone in Malaysia, is the new legal framework for Islamic banking and takaful, which is currently undergoing the legislative process towards its enactment. This new legal framework, will not only streamline the legal requirements across sectors, but will also ensure that the law is reflective of the nature and features of Shariah contracts and that the degree of regulation is commensurate with the level of risks that Islamic financial institutions, markets and products pose to the overall financial system. The greater clarity on the legal and prudential requirements underpinned by Shariah principles will enable participants of the Islamic financial system to align to their practices and expectations accordingly when undertaking Islamic financial business and transactions.
Islamic financing instruments currently comprise only a small fraction of microfinance business in the Organisation of Islamic Cooperation (OIC) countries. While there are success stories on the application of Islamic finance principles in microfinance programs, there is potential to have better models for Islamic microfinance. In addition, it should also integrate with other financial products such as microtakaful and other social welfare tools such as waqf to create a viable and impactful microfinance initiative. There are also immense opportunities for Islamic finance to leverage on the productive potential of small medium enterprises (SMEs) through greater application of equity-based structures in such financing structures. There is seemingly a natural fit between Islamic finance and SMEs financing in that both strongly promote entrepreneurship and value-creating activities. The third value proposition of Islamic finance refers to its emergence as new vehicle in bridging economies and contributing to increasing the financial linkages, in particular, the emerging markets. Previously Islamic finance was domestic centric. It is now increasingly providing financial solutions for cross border trade and investment. Progressive liberalisation has facilitated the internationalisation of Islamic finance. This has been reinforced by the dynamic pace of innovation in Islamic finance that has widened the range of financial products and services. This internalization process has thus contributed to the more efficient allocation of funds across borders from centres with surplus funds to regions with investment opportunities and to the diversification of risks. The now more developed Islamic financial markets have been particularly instrumental in intermediating such funds.