Islamic Banking And Finance: A Brief Comment
By: Ainsley Brown
Islamic banking and finance (IBF) is a subject that I have longed to blog about here on Commercial Law International and after much procrastination here is a brief commentary. And by brief I mean brief – don’t get me wrong this is by no means all I have to say about the subject, far from it. I simple wish to make my first foray on the site a brief introduction leaving the details for future posts.
So what is IBF?
Unfortunately there isn’t a plain answer to this question as there is no standard industry or even legal definition. IBF is therefore best understood as a term of art used to describe commercial practices guided by Islamic moral precepts. In fact in an article published in Credit and Banking Litgation Journal entitled: Islamic Banking and Finance: A Goldmine or Fool’s Gold? I defined it as: “in the simplest of terms, it is just like any other form of banking and finance, with additional elements such that it accords with the religious and moral principles of Islam.” This morality dictates the productive use of money for the benefit of the community in a way that is fair, just, and ethical and allows for the sharing of both risks and profits.
In future post I shall get into further detail as to what these moral precepts are and how they function. For now it is important to just know that they are found in the body of Islamic “law” know as the Shari’a. It is also important to note that IBF is not simply a matter of grafting on Islamic concepts on to western legal-business concepts or vis versa – Shari’a compliance often requires much more. It requires an understanding and appreciation of the fundamental differences in philosophy between IBF and conventional banking.
Even if you do not understand the first thing about IBF it is hard to argue with the market dynamics and its growing presence and importance in global financial markets. Don’t believe me? Well let me just end with and allow you to decide for yourself: globally IBF is estimated to be worth over £800 billion and has a predicted growth rate of between 15-20% annually.
