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Islamic Finance Essay

September 3rd, 2009 No comments

Islamic financial institutions now operate in over 75 countries. Their assets have increased more than 40-fold since 1982 to exceed $230 billion.

The first Islamic banks were created in the 1970s, at the time when the “aggiornamento” of Islamic doctrine on banking matters was taking shape. At the time, Islamic banks were typically commercial banks operating on an interest-free basis. Today, as a consequence of broad changes in the political-economic environment a new generation of Islamic financial institutions, more diverse and innovative, is emerging as the doctrine is undergoing a new aggiornamento.

Perhaps the most important development has been the growing integration of Islamic finance into the global economy. There is now a Dow Jones Islamic Market Index, which tracks 600 companies (from inside and outside the Muslim world) whose products and services don’t violate Islamic law. Foreign institutions such as Citibank have established Islamic banking subsidiaries, and many conventional banks– in the Muslim world but also in the United States and Europe–are now offering “Islamic products” that are sometimes aimed at non-Muslims.

Islamic finance is thus in many ways well suited to the global economy. Read more…