Islamic banking is an interest-free investment house rather than the interest-based money lending institute model of conventional bank­ing, which would lead to sharing profit and risk. This can cause a number of challenges.

There are major Islamic finance Shariah standards such as AAOIFI and IFSB. Also, various intellectuals look at Islamic financing differently, with each country, region and even bank having its own Shariah board to set rules and regulations. Having an interconnected Is­lamic finance ecosystem that covers all lines of business is therefore essential. Islamic finance is based on a trade contract, and contract con­trol is a major undertaking. Precise paperwork is a must for contracts and handling them is a difficult issue. Another challenge is that there is no single methodology used for product de­velopment. Additionally, Shariah regulations obligate the bank to have constant interactions with the customer, so maintaining focus on the customer is difficult.

One of the major challenges that ICSFS has seen as an Islamic banking software provider is that many Islamic banks have embarked on product-led digital solutions rather than taking a holistic approach. Another is that since Is­lamic banking products must be Shariah-com­pliant, the processing cycle takes a long time because more manual processes are needed.

Also, there is no standardisation or harmonisation of documentation, which increases the cost of transactions compared to conventional peers. All banks face challenges. We must all apply operational risk management, and have solid cyber security and business continuity strategies to be able to expand our digital of­ferings.