Islamic Finance, Islamic House Financing, Product Development, Regulation
The Islamic world is in its evolutionary phase. Islamic finance whichcomprises the banking system, takaful (Islamic insurance) and capital market productsand services offer an alternative to society. The development is said to bephenomenal with a double-digit annual growth rate since its inception. McKinsey & Company (2007) in his study stated thatthe value of Islamic banking assets and assets under Islamic management isexpected to reach USD1 trillion by 2010, with Islamic banks growing morerapidly than the average banking sector in most countries. As of 2009,worldwide assets under shariah compliance grew four times from 0.5% to 2% ofthe world economy and reached MYR3.5 trillion (PEMANDU,2010). With the increasing trends of Islamic finance, Islamic financialinstitutions (IFIs) around the world are encouraged to develop and innovate newproducts in order to meet the ever-changing demand from its customers andpotential customers. The introduction of new Islamic products does impose somechallenges, not only to the practitioners and Shariah council members, butalso to society at large, as they are the ultimate users of the product. Thispaper aims to look at the development and regulations of new Islamic banking productswith focus given more on Islamic house financing. Such developments bring aboutvariation in the products introduced to the public as different contracts are adopted.The focus will be mainly on IFIs operating and regulated in Malaysia withspecific enforcement by the countrys regulators.