Banking is already a confusing topic as it is, but now with Islamic financing entering the mainstream market, many are getting even more confused. To clear the air, let’s take a look at what it is all about.
It is not a new system
Many think that Islamic financing is something new simply because they’ve only just heard about it. In actual fact, Islamic economic theories and concepts have a long-established history, spanning more than a millennium. Due to changes in geopolitics and social upheavals across history, much of Islamic economics concepts were not practised. Instead, global nations utilised Westernised banking methods. But now, with Islamic financing available for everyone, consumers like you and I will have more options to choose from.
It is based on Islamic law
Islamic financing abides by the Islamic law which sets out the fundamental principles of banking in Islam. The term used to describe it is “syariah compliant” which serves to provide assurance to Muslim consumers that the products and services offered observe the fundamental rules of Islam. Having said that, Islamic banking services are not limited to the Muslim population only.
It is gaining world-wide attention
Well, Islamic finance appeared on the modern consumers’ radar as recently as the 1970s but has gained much attention and favour. It is estimated that there are about 1,400 Islamic financial houses operating in more than 80 countries worldwide today. The value of syariah-compliant assets stand at US$2.4 trillion today. The growth continues with experts predicting Islamic financing value of assets to reach US$4 trillion by 2030.
Islamic banking in Malaysia is big business
Islamic banking set foot in Malaysia in the 1980s after the Islamic Banking Act 1983 was enacted. Malaysia welcomed the first Islamic Bank at that time and since then there have been many others who followed suit. Today, Islamic banks are a norm side-by-side with conventional banking institutions. In fact, besides full-fledged Islamic banks, there are also foreign-owned ones, while conventional financial institutions have also diversified to offer Islamic products among their product and service offerings.
The future is sustainable
There’s no doubt that Islamic financing is experiencing a boom worldwide. Global leaders in the industry are Malaysia, Saudi Arabia and Luxembourg with the United Kingdom coming in aggressively into the market as well. To remain competitive, Islamic financial institutions must seize the opportunity to offer sustainable financial instruments to a public that is increasingly mindful of the stresses of our planet. Green financing that aligns with the United Nations Sustainable Development Goals are the way of the banking future.