Foreword
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 beingpracticed 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,andmakeasubstantialcontributiontoestablishing
Islamic finance as a viablealternative 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 investmentsareattracting
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 correctprocessesinfinancing
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.
