The concept of financial intermediation services without charged or paid interest, might raise cash-strapped hopes and more than a few eyebrows. But in Islamic finance, the basic premise is that charging interest is prohibited - it’s considered wrong to make money from money. Islamic bankers have developed a number of instruments that can perform financial intermediation functions without the involvement of interest. Wealth, then, is generated by these financial services only through legitimate trade and investment in assets. Even so, investment in alcohol, gambling, tobacco and pornography is taboo. The US$300 billion Islamic finance industry today represents a vast global practice and is the preferred channel of banking for one fifth of the world.

This wasn’t always the case - it began as a small banking experiment in rural Egypt during the 1960s. Islamic finance is currently expanding at a rate of 10-15% per annum. The success of Islamic banking has driven many conventional commercial banks to offer their clients Islamic financial services. Several multinational banks such as Citibank, HSBC and Deutsche Bank, are already actively involved in practicing sharia compliant finance as part of their business ventures.

A Guide to Islamic Finance is a newly published report which contains an overview of and the opportunities and prospects within the Islamic financial industry. It presents the fundamentals in a way that non-Muslim, non-Arabic speaking professionals can grasp the principles and is aimed at senior practitioners looking to enter this booming market. The report details the theory, practice and limitations of Islamic banking, and looks at how to develop products for the Islamic financial industry. It provides the basic guidelines for business contracts and evaluating and implementing the Islamic banking model and the financial modes presently in use by Islamic financial institutions. An extensive glossary of Arabic terms is also included.
Are you interested in Islamic Financial Services? Read another report about Bahrain being the international centre for Islamic Banking