SWEIMEH, Jordan, March 3 (Reuter) - Islamic banking must speed standardization to grow while monetary authorities should enact laws that allow expansion into new Sharia-based products in domestic markets, industry experts said on Wednesday.

The industry needs to surmount divergent views and practices, due to different readings of the sharia, and adhere to benchmarks as it looks for new ways to grow, industry experts said on the sidelines of an Islamic finance forum at the Dead Sea.

The fast-growing $1 trillion industry is now governed by a patchwork of national regulators, standard-setting industry bodies and Islamic scholars ruling on products and contracts.

Jordan's oldest Islamic bank, Jordan Islamic Bank , also urged monetary authorities in countries where Sharia-compliant banks operate to cater for their special needs.

There is a need for legislation that does not set Islamic banks apart from other banks but rather grants them the opportunity to invest in goods and other areas of investment, said Musa Abdelaziz Shihadeh, chief executive of the bank, whose main shareholder is the Bahrain-based Al-Baraka Banking Group.

Islamic finance, derived from sharia, or Islamic law, forbids charging interest and favors profit-sharing arrangements or structures that resemble rental agreements.

Islamic financing is usually underpinned by physical assets.

Mohamad Nedal Alchaar, secretary general of the Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), which helps set standards for the industry, said the priority was to establish common practices.

I think harmony is a prerequisite to success. ... So the issue of unified practices is extremely important at this juncture especially now that Islamic banking is present across the world, Alchaar told Reuters.

Differences of opinion among scholars have seen some financial products deemed un-Islamic in certain centers but permissible in others, creating uncertainty in the industry.

Fouad Alaeddin, Middle East managing partner at Pricewaterhouse Coopers, said another looming challenge was how Islamic banks can adapt to tougher risk management benchmarks being set in global financial markets while consolidating to pave the way for banks with billions of dollars of assets.

The question for Islamic banks now is how do you adapt to the future changes in regulations on liquidity, governance and capital adequacy in the banking industry ... and how would all these changes impact Islamic banking? Alaeddin said.

Jordan's Central Bank governor, Umayya Toukan, echoed the view of some monetary authorities who are still hesitant to lay out specific laws that govern Islamic banks beyond the normal banking rules until they raise their own standards.

I think it is very very important that the Islamic banking industry be part of the global banking system. It cannot be isolated, therefore the accounting standards, regulatory structures or requirements, the capital adequacy requirements, all of these issues should be consistent with international standards, Touqan said.

(Writing by Suleiman al-Khalidi; Editing by Leslie Adler)

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