Notwithstanding this significant progress, the process of innovation in Islamic finance has generally been structured mainly along the adaptation approach. Although there are Islamic financial instruments that are distinct from the conventional financial instruments, the numbers are still few. In most instances, the Islamic financial products are repackaged along the features of the conventional financial products, while eliminating the elements that are not in compliance with the Shariah. The Islamic financial services industry is now at the threshold of a new level of development. As we advance forward, the Islamic financial services industry can expect to have a different set of regulatory and supervisory standards which is conducive to its unique financial operations. There is also an increased awareness and understanding amongst the international financial community on the distinct nature of Islamic banking and financial operations. In addition, a higher degree of Shariah dynamism is evident in the evolution of sophisticated Islamic financial products that are being structured based on multiple Shariah concepts. Against these developments, it is timely to move away from “plain vanilla” innovation and to embrace a new wave of innovation that will evolve Islamic financial instruments into distinct products that will maximize the potential and wisdom of the Shariah and that meets the greater sophistication of consumers and the more complex requirements of today’s businesses. This paradigm of innovation in Islamic finance, which by itself shall accord Islamic financial institutions with the competitive advantage to forge ahead, entails substantial and continuous investments in research and development (R&D).

Undergraduate opportunities to study Islamic finance or Shariah, either as a speciality or a major component of a business degree, should be readily available at local and foreign universities. The challenge is to provide programmes which keep pace with changes in financial innovation and technology. Meeting this need requires rigorous, extended programmes such as the post-graduate programmes in Islamic Finance and Financial Engineering with emphasis on Islamic banking principles. At the same time, relevant organizations can support such programmes by creating funds to sponsor promising students to pursue formal education, ranging from modular courses in Islamic finance to full post-graduate programmes. There is also a need to increase programmes and initiatives that provide education and training in Shariah. Islamic research organizations and financial institutions need to work towards developing a sufficient number of competent Shariah scholars who are equipped with sound knowledge and expertise in both Islamic jurisprudence and Islamic commercial laws to deal with innovative and cutting-edge products. There is also the need for extensive education of the consumer and business community. This would increase the outreach resulting in increased demand for new and innovative products and approaches. Malaysia has implemented a 10-year structured consumer education programme to increase the level of consumer awareness on the unique characteristics of Islamic financial products and the product choices offered by Islamic financial service providers. Increased awareness will drive the demand for a broader range of Islamic products and services customized to their requirements at more competitive prices and through more convenient channels.