Islamic finance faces growth challenges
A steady flow of women wearing hijabs, or Muslim head veils, enter HSBC's Amanah branch in the Malaysian capital of Kuala Lumpur during lunch hour.
It's brisk business for the UK lender, which was one of the first global banks to offer Islamic finance - a field that is slowly starting to rival conventional banking in predominantly Muslim countries such as this one.
Islamic finance is based on gaining profits in a socially responsible manner.
Each transaction is underpinned by real trade or business activities that do not involve anything forbidden under Sharia, such as gambling or alcohol.
The global industry is estimated to be worth $1.3 trillion (£800bn; 1tn euros), and is growing at a rate of between 15% and 20% per year.Expansion challenges
However, HSBC's business has not been as profitable in other countries as it has been in Malaysia.
In October, it announced that it will close its Islamic finance operations in six markets, maintaining its presence only in Saudi Arabia, Malaysia, and a scaled-down operation in Indonesia.
End Quote Mohamad Akram Laldin International Shariah Research Academy for Islamic finance
In terms of compliance, it is compliant. But is it the best option? If you ask me, not necessarily”
Analysts say the problem that firms such as HSBC are facing in expanding their Islamic finance business is that different Muslim countries interpret Islamic law differently.
For example, contracts drawn up in Malaysia may not be recognised in Middle Eastern states, taking months to resolve.
Even for local players, the biggest challenge is not having clear rules and regulations when entering overseas markets.
"In Malaysia we have best practices. We have existing rules and regulation but what we have additionally for Islamic banking is clear regulations that allow us to have a better turnaround time for products and services," says Muzaffar Hisham, head of Maybank Islamic, the Islamic finance arm of Malaysian bank Maybank.
"This is what we hope to have in other countries as well."
Maybank Islamic is primarily focused on South East Asia, operating in Malaysia, Singapore and Indonesia.
It is also looking to expand in Bahrain, Saudi Arabia and London.Best option?
A lack of standardisation is not the only hurdle the sector is facing.
For an industry that is supposed to be built on ethics, there are questions about the integrity of some of its products.
According to the executive director of the International Shariah Research Academy for Islamic finance, Mohamad Akram Laldin, 80% of Islamic financial products are merely Islamised versions of conventional ones.
"In terms of compliance, it is compliant. But is it the best option? If you ask me, not necessarily," he says.
There is also a shortage of expertise in the field, which results in many Sharia scholars sitting on multiple boards.
Some have also been shareholders of the banks they are advising, says Mr Laldin.
"I am not saying that it is common but it does happen," he says.
To prevent these types of conflicts of interest, Mr Laldin is leading the negotiations with his counterpart in Saudi Arabia to create common regulations for Sharia scholars and to set up a global certification board.
"This is important because we want to boost the confidence of the investors and we want to be transparent," he says.
"At the end of the day, this is what Islam is propagating."Growing interest
And he believes reform needs to begin in the classroom.
Interest in the industry is clearly growing, with students from around the world studying at the International Centre For Education In Islamic Finance in Kuala Lumpur, where Mr Laldin's research institute is based,
Many aspire to become Sharia scholars - the people who determine what is or is not allowed in Islamic finance.
They form the backbone of the industry, but there are varying degrees of supervision of these religious experts.
Syed Aun Raza Razvi hopes to be one someday and is currently studying for a doctoral degree in Islamic finance.
As a student from Pakistan, he thinks common rules in the industry would be a good move for everyone.
"That would basically mean that my skill set is applicable to any region I go to instead of my skill set being 50% applicable in one jurisdiction and 30% in another jurisdiction," he says.
But standardisation in the industry may not happen by the time Mr Syed Aun graduates.
Talks have been stalled for the past five years because there is a perception that Malaysia is less strict in its interpretation of Islamic law compared to the Middle East.
That leaves the growth of the industry dependent on how well Mr Syed Aun, and other potential sharia scholars, can work together.