SINGAPORE: Islamic finance must strengthen regulation, boost its professional staff and diversify as it takes on a bigger global role in the aftermath of the worldwide financial crisis, experts said.

Financial products compliant with Islamic shariah law are likely to gain in popularity as investors seek safer havens after the ruin caused by toxic derivatives sold globally by mainstream Western banks, they said.

However, experts warn that Islamic financial institutions must be on their guard against falling into the same unbridled excesses that jolted Wall Street and snowballed into a global economic downturn. "Islamic finance is not immune from such pitfalls. Hence, we must be careful to avoid this error in the Islamic financial industry," said Muhammad Sulaiman Al-Jasser, governor of the Saudi Arabian Monetary Agency.

Islamic finance is now established in 47 countries with more than 600 institutions managing "balance-sheet assets" worth over 630 billion US dollars, with another 200 billion to 300 billion dollars managed as investment funds, he added.

Issuance of Islamic bonds, called sukuk, in Asian currencies aggregated to 64.3 billion dollars in 2008, down 1.5 percent from 2007 when it expanded by 50 percent over the year before, Moody's Investor Service said this month.

But the industry has much room for growth as Islamic finance represents only 1.0 percent of the total assets held by the global financial markets, experts said.