The world of Islamic Finance is still young and it was begins only a few decades ago. Although it is new, the Islamic Finance is rapidly develop and continues to expand to serve a growing population of Muslim. Many have been able to accept the Islamic financial system and even admiration of Islamic finance is increasing due to the uniqueness found in the Islamic financial system. The definition of Islamic finance is the system in finance that operates it activities based on Islamic law (which is called Sharia) and is therefore Sharia compliant. All Islamic financial activities is free from interest (riba) and it is based on profit sharing activities. In 6th century, the core concepts of Islamic finance date back to the birth of …show more content…
In the same year, Shell MDS in Malaysia was issued the first tradable Sukuk which is the Islamic alternative to conventional bond and from it, the Islamic bond market was emerged.
In 1996, Citibank began to offer Islamic banking services when it established City Islamic Investment Bank in Bahrain. The first successful benchmark for the performance of Islamic Investment funds namely the Dow Jones Islamic Market Index (DJIMI) was established in 1999. In the year of 2002, Malaysia-based Islamic Financial Services Board (IFSB) was established as an international standard –setting body for Islamic Financial Institutions. Lastly, the first Islamic commercial bank was established outside the Muslim world in 2004 which named Islamic Bank of Britain. From the year 1970 until now, more than 500 Islamic financial Institution have been established worldwide which include 300 Islamic banks. Currently, Islamic financial institution are operating in 75 Muslim and non-Muslim countries. There are several issues that arise in Islamic finance where the issues includes the lack of expertise in conducting Islamic finance system and also to supervise the system so that it according to Shariah compliant. Besides that, the diversion from conventional products to Islamic product also becomes one of the issue in
Islam is more than a religion, it’s a culture, and as such has an effect on political, social, and economic aspects of life—this is especially true outside of the Western world. Followers of Islam believe in full submission to God and this submission is practiced in the secular realm (Taha, 114). Of the five pillars of Islam, one (the zakat) has a direct affect on economic policy and ethics. The culture of Islam has shaped economic and business guidelines In the Islamic World and continues to do so. Cultural ideals attributed to the Qur’an or the Prophet Muhammad, have been a vital source for economic and business practices that have helped to shape the history of many Islamic nations, and are guiding the creation of policies
Islam as a religion and civilization entered the global stage through the life and career of Prophet Muhammad ibn Abd Allah in western Arabia between ca. 570-632 (Esposito, p.1). However, similar to other religions it is relatively difficult to provide an idea of what the religion is and how it has developed throughout the years. Islam can basically be considered as a faith that completely permeates the life of a believer and directs every action. Therefore, the
Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and
The prosperity and peace of a society much or less depends on its economy. While for the smooth running of both, there are several instructions in Islamic Shariah and allows what is right and forbids what is wrong. When we talk about financial issues, Islamic Shariah strictly condemns Riba. The question may arise why Islam prohibits Riba? While it was already in practice before the advent of Islam and still it is a part of different economic systems throughout the world. It is simply because Islam gives respect to human beings and condemns all the attempts that are harmful and disgraceful for humanity. Therefore, Riba is not only forbidden in Islam but economic experts are also in search of its substitute. Since borrowing on interest rate creates several issues including: less efficient allocation of resources, indebtedness, unemployment and economic instability. While in society it causes injustices, inequity, poverty and imbalance etc. In this paper we are discussing how Riba causes imbalance in the society and instead Riba what Islam demands from its followers.
Development of the Islamic equity market typically involves having in place a Sharī`ah stock-screening process which facilitates the identification of Sharī`ahcompliant stocks and therefore attracts wider participation from investors that seek Sharī`ah-compliant products. At the same time, it can facilitate the construction of Islamic equity indices.
Islamic financial institutions are growing faster all around the world. Most in Muslim countries, conventional and Islamic financial institutions exist side by side, interacting with one another. The development of Islamic financial institutions has the potential to play a leading role in serving the Muslim Ummah and contribute towards socio-economic development of Muslim countries in conformity with Islamic sensibilities.
AAOIFI – Introduction • Responsible for formulation and issuance of international Islamic finance standards. • Has issued 68 standards: 25 accounting standards; 5 auditing standards; 6 governance standards (incl. on Shari’a supervision); 2 codes of ethics; and 30 Shari’a standards (rules for application of
It regulates public and private behaviors and actions of people” (Mulcahy). Sharia law consists of an exceptionally broad topic span and has been interpreted many ways, especially on unclear points. Mulcahy said “Although the word of Sharia cannot be altered, like any other religious text it should not be interpreted word for word. This has obviously not been the case and has led to religious extremism and a strong split between Muslims”. The rules of Sharia are single-handedly what distinguish Islamic Accounting from other methods.
Study for evaluating the performances of inter-temporal bank against BIMB, an Islamic bank, was conducted by Samad & Hassan (1999) for a time frame of 1984-97, through the use of similar measures of performance. They concluded that in terms of performance inter-temporal bank was ahead, while risk to BIMB had gone up. Further studies showed that when compared with another set of 8 conventional banks, BIMB exhibited more liquidity and low to risk-scale.
Besides that, Islamic Banking is growing at a rate of 10-15% per year in this modern era with the signs of consistent future growth. Islamic banks have more than 300 institutions spread over 51 countries, including the United States
This study will attempt to discuss the distinction between the methodology of Islamic economics and positive economics. The study will start from defining each system, followed by comparing the similarity of the methodology, and finally contrasting of both methods.
Results indicate that conventional banks perform better in profitability, while Islamic banks perform better in liquidity and credit risk. In t-test of the return on asset (ROA) and total equity to net loans, there are no major difference between Islamic banks and non-Islamic banks. In the return on equity and common equity to total assets, there are statistically significant differences in these two groups. The statistically significant difference was shown in the area of liquidity which means that the Islamic banks liquidity performance has major difference with the non-Islamic banks.
Islamic finance refers to the provision of financial services in accordance with the Shari’ah Islamic law, principles and rules. The principles of which “emphasise moral and ethical values in all dealings have wide universal appeal” - (Institute Of Islamic Banking And Insurance - What Is Islamic Banking) Shari’ah does not permit the use of Riba (Interest), "gharar" (excessive uncertainty), "maysir" (gambling), short sales or financing activities that it considers harmful to society. The purposes and use of Islamic banks are similar to conventional banks, the only difference is that, Islamic banking is in accordance with the rules of Shari’ah which can also be known as ‘Fiqh al-Muamalat. Charging customers interest and fees for their services runs conventional banks. Islamic Banking is now well established, and heavily institutionalized in some 76 countries (Ariff and Iqbal). The existence of modern Islamic financial institutions was first recognized in 1960s and now has spread to a large number of Muslim countries including GGC (Gulf Cooperation Council), Arab, South and South East Asia, North Africa, and some of the west countries including UK, France, Denmark, etc. number
Research finding: Shariah compliance, Quality and Attractiveness of Offerings, Friendliness of bank personnel, Cost and benefit analysis and Awareness about Islamic banking.
On 1 August 2013, the Prime Minister unveiled the Malaysia International Islamic Financial Centre’s new brand ` Malaysia: World’s Islamic Finance Marketplace’. It promotes the rapidly expanding connectivity of Malaysia’s Islamic financial institutions with the global banking community. A robust financial infrastructure will enable better cross-border multi-currency transactions. In conjunction with the launch, the enhanced MIFC portal was also rolled out. Major enhancements include Islamic finance news feeds, live market data, thematic analyses and