Yet, the involvement by those outside the Muslim world is still "sporadic," experts said. The Middle East and Southeast Asia still account for a large majority of Islamic financial assets. In the sovereign sukuk space, Middle Eastern countries raised $11.85 billion in the 11 months through November, followed by Southeast Asia at $3.96 billion, Dealogic data showed.
Total Islamic financial assets have grown by 10 to 12 percent annually over the past decade to hit $2 trillion. But at less than 1 percent, they remain only a small fraction of global financial assets, according to the International Monetary Fund.
One hurdle standing in the way is the lack of standardization, Fitch Ratings said. Currently, different jurisdictions interpret Sharia differently and there is also variation in how Islamic finance products are structured. Differences in how disputes are resolved and reporting standards are monitored add to the complexity.
"In some cases, there is still little standardization even at a local level, while in others, progress would be needed on a regional, or international, basis," Fitch said in an October report.
Such divergence in interpretation can deter investors and the progress to resolve that issue will likely be "slow and patchy" given the scale of the challenge, Fitch added.
Experts told CNBC that notwithstanding the challenges, the Islamic finance sector is still poised for growth. The industry's size is expected to expand further to $3.5 trillion by 2021 as countries and companies look for alternative funding sources, and tap a larger pool of investors.
As an example, Maybank's head of global banking business, Arshad Ismail, said the sukuk market allows issuers to attract both Muslim and non-Muslim investors and therefore widen their sources of funds.
The financing costs for sukuk are also "generally similar" to conventional bonds as there is more expertise to execute such transactions now, which adds to the product's appeal, he added.