(Institutional Investor) - In the aftermath of the global financial crisis, the prospects for Islamic finance appear brighter than ever. The industry boasts an estimated $1 trillion in assets, and Islamic banking — untouched by subprime-mortgage-backed securities and other toxic assets that devastated many Western institutions — continues to grow at a rate of about 20 percent a year. Financial centers from Bahrain and Dubai in the Persian Gulf to Malaysia and Singapore in Asia are moving to improve their regulatory frameworks in a bid to win a bigger piece of the pie.

Yet much of the industry’s potential remains untapped. And the competition itself may be part of the reason, bankers and analysts say.

A lack of consistency in the interpretation of Islamic law by scholars who decide if a product complies with shari’a principles is holding back the development of a vibrant capital market and asset management business. The industry must resolve differences between the secular element of contracts frequently based on English common law and a shari’a board’s interpretation of the same contract if conventional money managers are to see long-term value in Islamic finance, an essential element for future growth. Among other things, shari’a bans the charging of interest and requires that loans be structured on a profit-sharing basis.

“There is a need for standardization and uniformity,” says Arul Kandasamy, head of investment banking at Abu Dhabi Commercial Bank.

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