The Institute of Islamic Banking and Insurance is pleased to be associated with GMB Publishing in putting together this important publication.
It demonstrates the areas where considerable progress has been made by Islamic financial institutions in offering alternative products and services, based on Islamic principles laid down in the Shari’a.
The contributors are leading professionals with expertise in the subject matter, and I hope that many will find the book invaluable in understanding how the principles of Islamic financing and investments are being practiced in modern times.
Those who believe that a financial system cannot operate in a modern economy without reliance on an interest rate mechanism must have been surprised at the progress of Islamic banking and its growing ability to compete on an equal footing with other more traditional forms of commercial banking.
During the last few decades, Islamic bankers and insurance professionals have shown that the financial market can grow in harmony with religious principles and make a substantial contribution to establishing Islamic finance as a viable alternative system. Studies and research conducted by economists, bankers and scholars have shown that Islamic banking and insurance have a number of features that combine moral and material values, which lend it universal appeal.
The commonly held view that Islamic banking is only meant for Muslims is incorrect; higher returns in Islamic financing and investments are attracting conventional financial institutions and fund managers to participate in large Shari’a-compliant deals. In the years to come, the growth in Islamic banking looks set to continue to make rapid progress as more and more, the great reserves of wealth of Muslims are diverted away from conventional banking practices.
In order to fully exploit this potential, stakeholders of Islamic financial institutions need to make a quantum leap rather than follow the evolutionary process.
Apart from having a better understanding and increasing awareness about the efficacy of the system and possessing strong imaginative marketing and technical expertise in financial matters, Islamic financial institutions are obliged to look at contracts and agreements that need redesigning and reengineering, but they have to ensure that the correct processes in financing and investment structures comply fully with the spirit of the Shari’a.
Furthermore, Islamic financial institutions should do much more to open up their Shari’a-approval processes to external scrutiny and strengthen the dynamics and effectiveness of their governance system to allow adaptation and innovations in structuring transactions and deals to cater for the public.
However, any adaptation and innovation should fulfil all the requirements
of the Shari’a.
