Islamic finance institutions are confronted with a number of challenges including towards the ASEAN economic market. Among the factors are issues with host and home regulations, financial innovations in the cross border context, shariah authority and taxation. In his keynote presentation at the 5th ASEAN Universities International Conference on Islamic Finance, AICIF, yesterday afternoon, Yang Berbahagia Professor Doctor Abdul Ghafar bin Ismail, a Professor of Islamic Financial Economics at the Faculty of Islamic Economics and Finance, Sultan Sharif Ali Islamic University, UNISSA also underlined the challenges in promoting Islamic finance for developing the sound and vibrant Islamic finance institutions towards the ASEAN economic market.

Professor Doctor Abdul Ghafar said financial innovations face a main challenge of coping with the rising demand from customers through conditions of sharing risk, lowering transaction costs, as well as reducing asymmetric information and agency costs. He added that although the context of cross border global transaction has increased, it also faces increased difficulties among them, lack of an integrated financial market. In order to match the challenges of Islamic Finance towards the ASEAN Vision 2025, he stressed that all the factors that challenges Islamic financial institutions need to be overcome in order to increase the cross-border financial transactions. He said, in trying to relate Islamic finance with economic development in the near future, Islamic social finance should be highly regarded as a mechanism to achieve the maqasid shariah.

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