Ahmed Salik Gilani 2012-02-0131
Islamic Banking Future Vision- Issues that hamper development of Islamic Banking. Introduction:
Islamic Banking and Finance, the Shariah compliant banking for Muslims, is unarguably at the nascent stage of its development as a financial competitor and alternative to the conventional interest – based banking system practiced around the world. The rise of the Islamic banking system has been nothing short of phenomenal, and at every turn, figures have proved that their growth has by far exceeded that of their conventional system counterparts. This is impressive; keeping in mind the recent economic crisis that has shaken up the world economy. However, for Islamic Banking to fully utilize the potential that its rise has proven, some vital issues need to be addressed without which Islamic Banking and Finance cannot hope to grow further, let alone compete on equal fronts with conventional banking institutions. These issues are numerous, and due to the limitations on this paper, the major ones have been discussed in detail. The Authenticity Issue
The first and the foremost issue that impedes the growth of Islamic Banking is the fact that there is widespread doubt and criticism regarding the authenticity of Islamic Banks. This can be summarized in just one question, which plagues the minds of those who are interested in the concept of Islamic Banking: Is Islamic Banking really Islamic? A variety of factors lead to this doubt. First of all, there is a huge divergence between the ideology and the practice of Islamic banking. The major portion of Islamic banking is based on the fact that there is a system of profit & loss sharing inherently established in its structure. However, as a contrast, the majority of the current earnings for Islamic banks do not stem from PLS based systems; rather, they arise from leasing, markup and other similar transactions, which carry virtually no risk. Many banks also derive...