Islamic finance: Challenges in 2017 and further ahead
Islamic finance: Challenges in 2017 and further ahead

Summary/Abstract: The article presents the growth story of Islamic financial institutions in the 21st century, observed mostly through the growth in the Islamic assets worldwide. Based on the structural analysis of this Sharia-based system (Sharia defined as a system of legal and ethical norms, based on Qur’anand Sunnah, further developed into fiqh), the article offers a multi-faceted analysis of the currentstate of Islamic finance. The purpose of the article is to critically analyse the current state of Islamic financial institutions and to identify the key risk areas, constituting important development barriers for the sector. The key identified barriers are: concentration of assets within banking sector, heavy geographical and sectoral exposure, small average size of Islamic financial institutions, lack of clear governing standards, complicated product structures, and lack of skilled personnel. The article also presents secular factors supporting further developments of Islamic finance, mainly rapid growth of Muslim population worldwide and potential ethical aspect of the sector’s risk sharing model, leading to its ability to reach out beyond Muslim communities. The article predominantly applies a deductive method, based on a secondary data analysis, using the latest available market data and policy papers from institutions like the World Bank Group. Sections of the article draw on the author’s current research on linkages between the structure of the UK based Islamic banks and their operating cost base.

• Details
• Contents