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ndonesia and Malaysia have agreed to establish a regulatory framework that will enable them to better synchronize their Islamic financial concepts.

As part of the plan, two memorandum of understandings (MoUs) were inked on Monday between the Indonesian Sharia Banks Association (Asbisindo), the Association of Islamic Banking Institutions Malaysia (AIBIM), as well as between Maybank Islamic Bhd and PT Bank Syariah Mandiri.

The signing of the agreements were witnessed by Vice President Boediono, Bank Indonesia Governor Darmin Nasution and Bank Negara Malaysia Governor Zeti Akhtar Aziz.

Sharia finance experts, as well as bankers and regulators from both countries were also discussing the issue at a two-day “Joint High Level Conference on Islamic Finance” at the Shangri-La Hotel in Jakarta starting Monday.

“I hope the conference could create grounds for setting policies, regulations, the quality development of institutions and human resources to boost financial system linkage between the two countries,” Boediono said in his opening remarks.

Zeti Akhtar Aziz, governor of the Malaysian central bank, said Indonesia and Malaysia, countries with large Muslim populations, could leverage their synergies to further develop the sharia banking concept and expand the spectrum of products and services.

Experts at the conference would discuss efforts towards the integration of sharia financial services between Indonesia and Malaysia, Darmin said.

“Issues in regard with the sharia-compliant money market, product development, regulation and legal aspects, infrastructure, concepts, accounting standards — including the relationship of sharia finance between Indonesia and Malaysia — would be elaborated throughout this event,” Darmin added

He said that Indonesia, home to the world’s largest Muslim population, needed to learn from Malaysia’s experience in providing sharia financial services. Malaysia had successfully promoted sharia banking services, which at present accounted for about 22 percent of the country’s banking industry, he added.

Indonesian sharia banks’ market share is currently only about 3 percent, but the growth of sharia banking services is quite high, reaching 38 percent in the past five years, far higher than the average 20 percent growth globally, he said.

At present, Indonesia has 11 sharia banks, which operate as independent companies, 23 as sharia units of commercial banks and 151 as secondary banks.

Zeti also said that the Malaysian central bank was currently drafting a new financial sector master plan aimed at boosting the country’s international links to reinforce its position as an Islamic finance hub.

It currently restricts the number of licensced branches foreign lenders can open, particularly in urban areas.

“We may, through ASEAN, allow ASEAN banks to have a greater number of branches,” she said.

Indonesia is Malaysia’s seventh most important trading partner, with bilateral trade between the two countries, increasing about five-fold over the last 12 years.

“Indonesia is also a very important investment destination for Malaysia,” he added.