Whether you are pursuing a career in Islamic finance as an academician or in the industry, your doctorate can help you make a huge impact on the industry. Almost 80% of all Islamic finance transactions involve debt financing, which is market-based and Shari’a-compliant. The best PhD programs in Islamic finance will prepare you to become a leading expert in the field.
80% of Islamic finance assets are Shari’a-compliant
Islamic finance is rapidly growing and represents approximately 1% of global financial assets. Growth in Islamic finance in 2019 was faster than in conventional finance, but is expected to slow down in COVID 19. Some Islamic banks compete directly with Western banks, and other Islamic institutions provide a service similar to Western banking. Most importantly, Islamic banks do not issue interest-based loans.
Islamic finance is a form of finance that places emphasis on ethics and real economy rather than speculation. It also avoids engaging in immoral and ethically questionable activities. Islamic banks were able to survive the global financial crisis in 2008 because their investments were rooted in real economy assets. In addition, they were not involved in toxic assets and thus were able to weather the storm better than conventional banks.
Islamic commercial banks use nominated contracts, or combinations of contracts, to provide financial services. Many of these are used in home financing. In these arrangements, the homebuyer and financier buy a house together. They then pay rent on the financier’s share of the house over a fixed term. At the end of the term, the homebuyer will own the entire house. This arrangement is also known as a lease to buy.
Lack of access to finance is one of the greatest challenges facing Africa. There are over 350 million people who do not have a formal bank account. The introduction of Islamic finance products to Africa could improve financial access for this population. Furthermore, Islamic finance products could serve as an alternative to conventional banking and insurance services for financially underserved populations in Africa. Islamic finance products may also be a way to increase the number of financial institutions that offer Shari’ah-compliant products.
The use of Islamic teachings as a guide to economic decision-making dates back to the Prophet Mohammad’s time. This tradition is more than 14 centuries old, and the use of Islamic teachings to inform financial decision-making continued until the 20th century. With the advent of modern interest-based banking and the independence of Muslim-majority countries following World War II, new references to Islamic finance came to the fore.
Islamic finance is a growing industry and an important part of the global financial system. Today, more than $2 trillion in assets is held by Islamic banks. By 2024, this number will reach $3.5 trillion. Moreover, the industry is growing at a rate of 15% to 25% per year.
Islamic finance promotes economic development and financial inclusion. It emphasizes partnership-style financing and has a direct connection to the real economy. This can increase access to finance for small businesses, agriculture and food security. It can also serve the needs of those who would otherwise not use conventional finance. For example, only 14 percent of the world’s 1.6 billion Muslims use banks.
80% of Islamic finance transactions are market-based
The World Bank and the General Council for Islamic Banks and Financial Institutions have signed a Memorandum of Understanding to help the global Islamic finance industry thrive. The agreement aims to expand the use of Islamic finance as a tool to finance global development. The World Bank Group’s work in Islamic finance is related to the organization’s work in reducing poverty, increasing access to finance, and developing the financial system in client countries.
Islamic finance is a viable financial system that can help the global economy grow and create shared prosperity. It encourages the creation of a more equitable global economy through its direct link to physical assets. It also encourages the financial support of productive enterprises. By requiring risk-sharing and profit-sharing arrangements, Islamic finance encourages investments that contribute to economic development. Furthermore, it discourages financial speculation.
The Islamic finance industry has been growing rapidly for the past decade. Its assets have grown from $200 billion in 2000 to $3 trillion in 2016, and are projected to reach $4 trillion by the end of the decade. It offers a variety of products, from mortgages to traditional loans to investment banking products such as Islamic bonds and equity funds.
Most countries that facilitate Islamic finance transactions are governed by civil or common law legal systems. Such countries lack the necessary legal infrastructure to enact strict sharia-based regulations and standards. The majority of AAOIFI members are IFIs and private parties, and thus adoption of the standards is often referred to as bottom-up or voluntary.
Islamic banks have close rates of return on account, though their mechanisms are different. A 2014 study in Turkey found a significant relationship between the term-deposit rates of three of four “participation banks”. This finding suggests that Islamic banks manipulate returns to assure their customers.
Islamic finance is based on sharia, but there are many exceptions. In particular, there are provisions prohibiting gambling, speculation, hoarding, and trading in forbidden commodities. Some basic financial instruments are cost-plus financing, profit-sharing, leasing, partnership, forward sale, and musharaka.