The Growing Importance of Islamic Finance and Its Challenges in Mauritius

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Chapter 1 – Introduction

Though small compared to the whole global financial system, Islamic finance is growing and is already playing a significant role in the global financial system. It has established itself as an emerging alternative to conventional interest-based banking. There is every reason to believe that this growth will continue at a rapid pace as there is increasing demand for these products, and a closely associated desire on the part of banks, including non-Islamic banks, to provide Islamic financial services. At the same time, although it is still modest in size relative to conventional retail banking, Islamic retail banking is rapidly becoming more visible. This is true in most part of the world, where a number of Islamic banks and banking units have been opened in recent years. The growth of Islamic finance is also visible in the expanding range of services and products that comply with the basic precepts of Shari’ah law. The broadening appeal of Islamic finance is also evident with the move of large international banks such as Hong Kong and Shanghai Banking Corporation, Standard Chartered, Citibank and Deutsche Bank and other private sector financial institutions to structure and provide Islamic financial products and services. This includes the establishment of exchange-traded funds that are screened to ensure their conformity with Islamic investment principles, as well as offering Takaful. 1.1 – Research objective

In this study, an attempt is being made to ascertain the growth of Islamic Finance globally. Furthermore, it will demonstrate that there is a valid case for implementing Islamic Finance along with conventional banking, assess if past and current experiences from other countries can help in the implementation of same in Mauritius and whether Mauritius is ready to face the challenges. This study will also help individual and institutional investors in opting for ‘better’ investment strategies and policy makers will be able to...
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