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Islamic finance - Essay Example
Author : sbosco
Religion and Theology
Pages 8 (2008 words)
Islamic finance and banking was launched as a significant practice in the financial field almost 30 years ago and has grown from a marginal industry to raise hope in a situation that was getting desperate. …
It may be defined as a finance system that conforms to Islamic law, also known as Sharia, although the definition does not imply that is it limited to Muslims or Islamic countries (Rammal & Zurbruegg 86) Islamic finance is guided by ethical concepts prescribed by Sharia in relation to money and capital and the association between profit and risk as well as the social obligations of financial institutions. It has grown into a global and cosmopolitan financial system, committed to a text that may be accessed by all people. Being open to innovation, the system has been able to effectively compete with the conventional financial system by offering a wide range of financial products suiting numerous customer needs. Serving as an alternative to the conventional financial system, Islamic finance has been forging a more functional link between activities of real economy that generate value and the financial activities which facilitate it. This paper will discuss ways in which Islamic finance can be considered as an alternative to conventional finance and why it is a viable alternative. Governance and Regulation Although it is governed by the same fundamental monetary policies as conventional banking, the key and most significant distinguishing factor is the requirement of a strict adherence to a code of ethics (Zepeda 52). At the microeconomic level, Islamic finance is regulated by Sharia supervisory boards, or Sharia scholars at the least, who are responsible for approving and reviewing financial products and practices for compliance with Sharia guidelines. ...