The Islamic Development Bank (IDB), a Jeddah-based multilateral institution, has called for the creation of a global sharia advisory board that can offer greater uniformity for the Islamic finance industry, its president said on Thursday.

A centralised format to the supervision of sharia-compliant banking products is gaining favour across the globe, as regulators seek to standardise industry practices and improve consumer perceptions.

The suggestion can easily be made these days that sukuk as a borrowing and investing instrument is well and truly coming of age.

Certainly, there are many voices denoting that the Islamic variant on conventional fixed-income is establishing itself in the financial marketplace, tapping not only into the supposed relative safe-haven appeal of bond-related assets but also the regional and demographic drivers pertaining to the Sharia-compliant counterpart.

The prospect of higher yield in Australia is driving Islamic investors Down Under just as it is the broader global investment community, but the focus on capital-intensive industries is adding to its appeal for this source of funds.

Managers of two fledging Islamic funds set up in Australia in the past 18 months say they knew these factors presented opportunities, but they were still surprised by the level of interest from Islamic investors.

When Fabiola Nava Carrera told her friends that she was going to pursue a master of business administration degree in Islamic finance at a Malaysian university, they were taken aback.

“I was very interested in going there to see what was going on, because I knew nothing about Asian and Islamic culture,” said Ms. Carrera, a 27-year-old Mexican who had previously worked in international trade. “But my friends in Mexico couldn’t believe that I wanted to go to Malaysia, because they thought that it would be too dangerous or that the culture would be too different.”

Saudi Arabia has left the International Islamic Liquidity Management Corp (IILM), which is preparing to launch its first long-delayed sukuk or Islamic bonds since its inception in 2010, the IILM said late on Wednesday.

IILM did not give a reason for Saudi Arabia's exit. The central banks of Qatar and Malaysia bought out Saudi Arabia's share.

Islamic banks say their small scale and a lack of risk-management products makes it harder for them to compete, after Ernst & Young LLP warned lower profitability threatens to slow expansion of the $1.8 trillion industry.

The average return on equity at Shariah-compliant lenders was 11.6 percent in 2011, compared with 15.3 percent at their non-Islamic counterparts, according to a December report by Ernst & Young that covered 12 countries. The use of hedging and treasury solutions is lagging behind, Haszeri Hussin, head of Islamic global markets at Hong Leong Islamic Bank Bhd. (HLBK), a unit of Malaysia’s fourth-biggest lender, said in a March 1 interview.

Regulatory reforms are underway to help Malaysia's Islamic banking industry expand further, but for government plans to succeed, they will need to be matched by action from some reluctant banks.

The government originally aimed for 20 percent market share for Islamic banks by 2010, but despite double-digit growth in both lending and assets, the sector has fallen shy of this mark.

Despite the gloomy global economic outlook, the Malaysian sukuk market could see double-digit growth as Asian markets return to normal in the next six to nine months, according to RAM Ratings Services Bhd.

The sukuk is an Islamic financial instrument that is equivalent to a bond in conventional banking.

The revised screening methodology for shariah-compliant securities, to come into force in November 2013, could not only make for a more "stable" shariah-compliant securities list but also a shorter one, as it looks to screen companies not only based on income from activities but also on debt and cash in its balance sheet.

As at November 2012, 817 or 89% of the total 923 companies on Bursa Malaysia are shariah-compliant.

The implementation of the Malaysian-based Islamic Financial Services Board (IFSB) rules and regulation among central banks should be made mandatory to bring the industry to the next level, said Bahrain Central Bank executive director Khalid Hamad. He said mandatory rules and regulation would help the industry to grow better and avoid disagreement on syariah adherence.

“If you want any industry to grow, you need proper rules and regulations, proper standards be it accounting, practice or prudential and skilled resources,” he told reporters here yesterday.