Islamic banking is witnessing a strong continuous growth at a rate of about 35% across the globe, with assets of financial institutions reaching a phenomenal $600 Billion in 2007, as reported by Arab News. Furthermore, the number of operating Islamic banks reached nearly 470 in 2007, a significant increase from the 276 banks operating in 2005.

The introduction of new Shariah-compliant products like “Takaful” (insurance) services, comprising ‘life takaful’, by Islamic banks are considered to be a main growth driver for Islamic banking. These products are offered by various foreign banks through special divisions in Western countries due to an increasing demand for these value-based services.

Moreover, a large number of customers are shifting from conventional system of financing to Islamic finance as it is safer and more stable than traditional systems because banks and clients together take decisions and share risks, leading to strong growth in Islamic banking.

Furthermore, in traditional financing systems, there is a risk of receiving inappropriate information with clients unable to repay debts, which results in huge losses to the bank. Islamic banks attempt to maintain bonds in society by assuring fair and just distribution of profit and wealth among all the parties, as well as a general economic growth.

However, most of the financial institutions are unaware about Shariah as they have only heard of traditional banking systems. Also, their employees are unaware of principles of Islamic banking and it is likely to badly affect the Islamic banking system as they will be unable to pitch the products well.

According to a research analyst at RNCOS it is necessary to launch joint Islamic banking projects with diverse Shariah-compliant products to support the global economy. In order to achieve these goals, banks should develop new projects and take steps for implementing Islamic takaful. Also, to develop ideal Shariah-compliant products and to analyse various business fields, scholars of Islamic banking are required.

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