There is a renewed push by Canada's financial services firms to provide Islamic investment products, in an attempt to meet the demands of the country's growing Muslim population. Following Shariah principles, which govern all aspects of Muslim life, Islamic-based finance prohibits many conventional practices such as interest fees, speculative transactions and investment in industries such as alcohol, gambling and financial services.

“We have a growing Muslim community in Canada that is prominent and increasingly well heeled, and seems to be interested in adopting Islamic finance,” said Jeffrey Graham, a partner in the Corporate Commercial Group in the Toronto office of Borden Ladner Gervais LLP.

Despite the growing market and widespread demand, previous forays into Islamic finance have been unsuccessful, due to a combination of regulatory and taxation uncertainties, as well as a general lack of knowledge of the issues.

Recent progress has been made to help reduce these obstacles. In January, a study commissioned by the Canadian Housing and Mortgage Corporation concluded that Islamic financing products can be accommodated under Canadian legal and accounting rules. However, many legal advisors say more clarification from the regulators is necessary.

“I don't think there's any question that the Canadian system needs to be tweaked to truly accommodate Islamic finance,” says Graham. “There certainly are obstacles, barriers and limitations.”