Islamic financial assets have grown at double-digit rates over the past decade, from about $200 billion in 2003 to an estimated $1.8 trillion at end of 2013.( A large part of Islamic finance—around 80 percent—is composed of Islamic banking assets; the remainder is composed of Sukuk (15 percent, asset-backed or asset-based instruments), Islamic funds (4 percent), and Takaful (Islamic insurance).
Can Islamic finance support stability and inclusion?
Islamic finance offers several features that are consistent with these objectives. Islamic finance refers to financial services that conform with Islamic jurisprudence, or Shari’ah, which bans interest, speculation, gambling and short-sales; requires fair treatment; and institutes sanctity of contracts. And these principles hold the promise of supporting financial stability, since a key tenet of Islamic finance is that lenders should share in both the risks and rewards of the projects and loans they finance
https://agenda.weforum.org/2015/04/can-islamic-finance-support-stability-and-inclusion/?utm_content=buffer4a4a2&utm_medium=social&utm_source=facebook.com&utm_campaign=buffer
One of the major goal of a financial product or concept is one of financial access an inclusion. In terms of inclusion, Islamic banking concept is too restrictive. It target a specific component of the population, especially in non-Islamic states since it is meant for those who subscribe to Islamic ideals. Stability seems to be further than thought, since peace and economic stability is critical for financial stability. So, with war and conflicts in economies where Islamic banking is rooted, growth and stability in the financial sector will still be mirage.
The basic fundamental of Islamic banks which is supposed to avoid riba', excessive uncertainty or excessive risk and gambling should actually actually make it more safe and stable. This is more significant with the stability of other factors like the institutional factors like the political conditions etc in the countries.
You have to define what is Islamic finance, some are copied from conventional.
Dear Samuel O. Onyuma
The principles of Islamic Finance are universal in appeal and one does not have to endorse the theological tenets of Islam in order to avail the services of Islamic finance. It is meant to encourage trade and commerce in this world and not in the afterlife. In fact anyone who thinks that sectors such as tobacco, alcohol, gambling, pornography, usury etc. would be a disservice to the society is a candidate ready for Islamic Finance.
As long as financial inclusion and stability is concerned it provides the necessary fillip for innovation, novel ideas by partnering in new business ideas as well as using collective effort to nurture it and share profits unlike the conventional banking system which provides the capital and requires the periodic interest payments irrespective of the financial health of the new venture. Thus Islamic Finance encourages new ideas, creative thinking, entrepreneurial spirit rather than thinking about how to pay back if the business goes down.
Dear Dodik Siswantoro
Islamic Finance refers to the provision of financial services in accordance with Shari’ah Islamic law, principles and rules. Shari’ah does not permit receipt and payment of "riba" (interest), "gharar" (excessive uncertainty), "maysir" (gambling), short sales or financing activities that it considers harmful to society. Instead, the parties must share the risks and rewards of a business transaction and the transaction should have a real economic purpose without undue speculation, and not involve any exploitation of either party.
I think that it largely depends on who really controls the assets in terms of mobilizing them freely. Assume that you are a rich person who deposited a large sum of money in a certain foreign bank. Superficially, the bank account is yours but actually you have given your money to a place which is NOT under your authority. Any time, you may be denied access to utilize your money under variety of justifications. Some rich Arab persons have suffered this & they surrendered to thinking that their money has "evaporated" upon investing(?) abroad.
Can Islamic Banking Increase Financial Inclusion?
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I am responding to this thread from the takaful perspective. Whilst much has been written regarding the growth potential of takaful, its impressive growth is limited to Muslim markets, where users clearly have an affinity for the concepts and ideals contained in its arrangement and they are starting from a low base. However knowledge of takaful among Muslims is limited as studies in Malaysia and Bahrain have shown. Some of the previous contributors to this thread propose takaful is an attractive proposition because of its inclusive, ethical, and transparent philosophy. This argument has some merits as takaful has similarities with mutual insurance which is popular in non-Muslim markets. However, evidence of awareness or understanding among non-Muslims towards the attributes of takaful is limited. My own research demonstrates that it is lacking. Key to this issue is the appetite for takaful operators to market their products to non-Muslims or how this marketing will evolve.
In response to the response of Nizar Matar I would agree that the loss of funds following an investment is indeed traumatic and investing across borders has its risks, especially in terms of jurisdiction and local rules. What is not clear from your post is the type of institution that you refer to. I am not sure how or why a bank in a credible economy would withhold the investors deposit or what the justifications that you refer to are.
The Promise of Islamic Finance: Further Inclusion with Stability
Posted on April 6, 2015 by iMFdirect
By Mohamed Norat, Marco Pinon and Zeine Zeidane
Since the global financial crisis, policymakers have sought to press the “reset” button to strengthen financial intermediation that is performed by conventional banks and non-bank financial institutions. The aim has been to address the fault lines that helped trigger one of the most devastating financial crises in a century, and to enable a more inclusive, stable financial system that promotes stability as well as economic development and growth.
Islamic finance offers several features that are consistent with these objectives. Islamic finance refers to financial services that conform with Islamic jurisprudence, or Shari’ah, which bans interest, speculation, gambling and short-sales; requires fair treatment; and institutes sanctity of contracts. And these principles hold the promise of supporting financial stability, since a key tenet of Islamic finance is that lenders should share in both the risks and rewards of the projects and loans they finance.
Can you certainly demonstrate that Islamic banking is a totaly different sort of finance?
Well, out of emotion and party spirit debates, the Islamic finance seems a capable sort of finance. If young students be aware of multiple aspects of Islamic financial instruments, upcoming generation will construct a practical sort of Islamic Economy. I mean there are a cascade of potential instruments which need to introduce as a model that young students are supposed to do that. Model making is what we need to screw up the western finance. In this condition we can increasingly add values to the global finance.
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