A Comparative Review of the Regulation of Islamic Banking and Finance in Indonesia, Nigeria and the United Kingdom

Abstract

This study examines the nuances of the regulation of Islamic banking and finance in three major jurisdictions, i.e. Nigeria, the UK, and Indonesia. It addresses the challenges and prospects for these legal systems and economies. The research adopts a qualitative methodology, drawing theory from a vast trove of materials from authors in the African, Asian, and European continents. The intention behind bringing this topic into discussion primarily revolves around the undeniable significance that Islamic finance has in certain parts of the world. Islamic banking dominates the global Muslim finance industry, representing 80% of Islamic financial assets. There is growing concern for the subpar usage of the practice in certain jurisdictions. Most of the scholarship on this matter does not question this need, perhaps due to the general acceptance of the conventional banking system worldwide. Previous research works are yet to undertake a comparative assessment of the usage of Islamic banking and finance practices among jurisdictions, spanning representative nations from diverse regions and continents, thus causing a gap in the literature. This article discusses the legal and regulatory provisions, earmarking the practice of Islamic banking and finance in the jurisdictions using available literature. While each jurisdiction recognizes the practice of Islamic finance, those in Indonesia and, to a good extent, the UK, have richer provisions for its development. Thus, while taking cognizance of the socio-cultural contexts, a critical assessment of the regulatory mechanisms in Nigeria is carried out against the background provided by the Indonesian and English legal systems. It is discovered that for the existence of a robust appropriation of the practice in the jurisdictions, especially Nigeria, a forward-looking system must be adopted.