Synopses & Reviews
Synopsis
The Islamic Finance industry has experienced significant expansion in the last decade with a growth of 15% per annum. Islamic banks' assets globally are forecasted to grow beyond $2 trillion and it is also projected that the Islamic finance industry will spearhead double-digit growth of about 20% between the years 2011 and 2015. Middle Eastern petro dollars, thriving Asian economics and a growing religious consciousness amongst the world's Muslim population together, has contributed to this phenomenal development of the industry. This growth, however, has not been without controversy. The Islamic finance industry's legitimacy and progress hinges upon the religious aspirations of its customers. Shariah compliance of the industry has been a point of contention. Dr Azmat, however, reconciles the differences between those who feel that the financial impact of Islamic financial structures is no different from conventional instruments and, hence, they should be considered non-Shariah compliant and those who advocate their Shariah legitimacy by pointing out their juristically sound underlying financing models. He argues that the financial impact of Islamic and conventional instruments has its origin in the way they are priced and structured. This similarity in the pricing mechanism and structures is an outcome of not the underlying Islamic financial models but the competitive environment where Islamic financial instruments compete. He examines what makes Islamic finance different and focuses on the differences that occur as a result of the adherence to Islamic law and considers the risk and reward implications of these Islamic features.
Synopsis
Islamic finance's phenomenal growth owes to the Shariah compliant nature of its financial instruments. Shariah forbids the charging of interest (Riba) and instead promulgates risk-sharing and trade-based modes of financing. The Islamic financial industry has been subject to both critique and admiration. Critics argue that Islamic instruments (bearing debt-based structures) differ from their conventional counterparts only in legal lexicon and not in economic impact. The admirers argue that such instruments, irrespective of wider economic implications, rigorously comply with 'juristically sound' Islamic principles.
This book aims to reconcile the above dispute. It argues that the financial impact of instruments is a consequence of the way they are priced and structured. The similarity in pricing and structures is an outcome not of the underlying Islamic financial modes but of the competitive environment in which Islamic instruments compete. Even risk-sharing and trade-based Islamic structures, if implemented in such an environment, would have a financial impact similar to that of conventional instruments.
This book has a wider appeal for both academic and non-academic audiences. It can complement undergraduate and graduate courses as an additional reading on the intricacies of Islamic financial instruments and markets. For PhD students, it would help identify future research areas. To non-academics, it offers a deeper understanding regarding the working of the Islamic finance industry.