Professional Documents
Culture Documents
Islamic Banking Industry
Islamic Banking Industry
I. Introduction
Recently, Islamic banking has become a very important part of the global financial
services industry.
This paper aims to clarify the concept of Islamic banking, highlight most popular
features of Islamic transactions; how these transactions in practice are similar to
the conventional banks transactions, and the experience of the Gulf Cooperation
Council (GCC) in Islamic banking field.
Many writings argue that the practice of Islamic banking is so far from its theory.
This paper also investigates the question of whether the key issue in Islamic
banking is to meet certain procedures or to achieve the goals of Islamic law.
VII. Conclusion
The key characteristic of Islamic banking is the interest-free rule which came out
from the holy Quran provisions. The Profit-Loss Sharing (PLS) is a key concept to
understand the Islamic banking instruments. In theory, Islamic banking
transactions are different from the conventional banks transactions. In practice
they are similar, due to the actions taken by Islamic banks to reduce the risks. While
the sharia law aims to promote equality and fairness in the society, the reality of
Islamic banks performance is focusing on gaining money.
IFSB aims to set up standards and guidelines to promote the stability of Islamic
banks over the world. However, the manner in which Islamic banking services are
currently provided in Muslim countries, GCC in particular is not likely to transform
Islamic banking into a true universal banking system; it is more likely to remain as
a specialized form of banking services.
The experience of GCC and other Islamic countries in Islamic banking industry
appears I that such industry will remain a small segment of the global banking
market, supported primarily by GGC oil money. The Islamic banking industry
remains a niche market, despite its spreading in the Middle East and throughout
the Muslim world and even in parts of the West countries.
To make a real competition between Islamic banks and conventional banks in the
market world, Islamic banking industry needs to adopt the requirements of the
global financial system and reinforce its structures.
The acceptance of Islamic banking worldwide and its spread over the world is faced
by serious obstacles, such as the agreement on what is and what is not acceptable
as sharia compliant throughout the Islamic industry.
_________________________________________________
The Organization of the Islamic Cooperation (OIC) is an inter-governmental
organization grouping fifty-seven States. These 57 States decided to pool their
resources together, combine their efforts and speak with one voice to safeguard
the interest and ensure the progress and well-being of their peoples and those of
other Muslims in the world over; (Sep 24, 2015, 2:00 PM)
"The prohibition of riba is mentioned in four different revelations in the Quran. The
first revelation emphasizes that interest deprives wealth of Gods blessings. The
second revelation condemns it, placing interest in juxtaposition with wrongful
appropriation of property belonging to others. The third revelation enjoins Muslims
to stay clear of interest for the sake of their own welfare. The fourth revelation
establishes a clear distinction between interest and trade, urging Muslims to take
only the principal sum and to forgo even this sum if the borrower is unable to repay."
Mohamed Ariff, Islamic Banking, Asian-Pacific Economic Literature, vol. 2, 2-3
(September 1988).
In order to avoid gharar the parties to a contract must make sure that both the
subject and prices of the sale exist, and that parties are able to deliver and parties
must define the quantity, quality and date of future delivery, if any.
The Basel Committee is the primary global standard-setter for the prudential
regulation of banks and provides a forum for cooperation on banking supervisory
matters. Its mandate is to strengthen the regulation, supervision and practices of
banks worldwide with the purpose of enhancing financial stability”.
The Islamic Financial Services Board (IFSB) is an international standard-setting
organisation that promotes and enhances the soundness and stability of the Islamic
financial services industry by issuing global prudential standards and guiding
principles for the industry, broadly defined to include banking, capital markets and
insurance sectors.
Ibrahim Fares L.L.B in law from Al al-Bayt University, Jordan (2006), his master’s
Degree in Law, Bir Zeit University, Palestine (2009), his L.L.M Degree in Law from
University of Pittsburg, the United States (2013), and his L.L.M Degree in Law from
LAZARSKI University, Poland (2014). He is a member of the Palestinian Bar
Association (2006), and he is an Arbitrator in Commercial and Civil transactions
(2015).
He has over 8 years’ experience in corporate law and finance as senior associate at
one of Palestine's most prominent law firms (Husseini and Husseini Law Firm)
where he specializes in commercial transactions, mergers and acquisitions,
contracts (other areas include intellectual property, banking, labor and
employment, investment and taxation).