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Islamic
Financial System is a Way Out from Financial Crises |
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by Haris Ahmed, Business Development Executive, AIMS |
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“Islamic
Financial System provides a way to asset based ‘Genuine’
economical system and a way out from current global financial
crunch. Islamic banking system is based on risk-sharing, owning
and handling of physical goods, involvement of parties in
trading, etc. Islamic financial transactions, in order to be
permissible, should be associated with goods, services or
benefits”, said by Mr. Haris Ahmed in a seminar by ‘AIMS’ in
United Kingdom......... |
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“Islamic Financial System provides
a way to asset based ‘Genuine’ economical system and a way out
from current global financial crunch”, said Haris Ahmed, in a
seminar on 1st October 2008 in London organized by ‘AIMS’. AIMS
or Academy for International Modern Studies is one of the
leading Islamic Finance training and consultancy organizations
based in Chatham, United Kingdom.
Mr. Ahmed, who is a Business Development Executive at AIMS,
explained that Islamic financial institutions are more close to
the economy because they have to share the entrepreneur's risk
by providing some capital and sharing the profit after. Islamic
Banks don't give conventional loans with interest but they
become shareholders and they share the risk of the
entrepreneurs' success. He explained that Islamic Financial
system prohibits ‘interest’ but it does not prohibit all gains
on capital. The prohibition of a risk free return and permission
of trading makes the financial activities in an Islamic set-up
real asset-backed with ability to cause ‘value addition’.
Islamic banking system is based on risk-sharing, owning and
handling of physical goods, involvement in the process of
trading, leasing and construction contracts using various
Islamic modes of finance. Islamic financial transactions, in
order to be permissible, should be associated with goods,
services or benefits.
Islamic financial products are getting appreciation worldwide
and it could provide safe havens in these challenging times.
With US politicians scrambling to fix up the mess, and leaders
on both sides of the American political divide call for changes
to financial regulatory frameworks, it might not sound so far
fetched to suggest Wall Street might learn from Islamic
financing. In Islamic finance transactions undertaken, it's more
asset based rather than debt based. The lack of debt in the
Islamic finance sector shields it from many of the problems
caused by bad credit. Banning short selling is one of the
decisive elements in Islamic finance so it seems almost that the
conventional markets are looking at the Islamic techniques which
so far did not play any role in conventional markets.
The current Muslim population in the world is more than 1.5
billion, which is approximately more than 23% of the worlds’
population. Islamic Banking is one of the fastest growing
financial sectors, worldwide. The industry size is estimated to
be more than 750 billion and its yearly growth rate is
approximately 20%.
In his speech, Mr. Haris Ahmed enlightened that the size of
Islamic Finance industry can grow with a higher percentage, if
some of the industry issues are resolved. For example, it is
found in several Islamic financial institutions that human
resources working in IFIs do not fully understand the standards
and rulings of Islamic financial products. Due to this, they
couldn’t follow the exact operational mechanism explained by
Islamic shariah. In addition to that, the mechanisms of few
Islamic Financial Instruments are unaccepted by several renowned
Islamic scholars worldwide, including sharia scholars in Saudi
Arabia, Malaysia, Pakistan, United Kingdom, Jordon, etc. As a
result of these facts and doubts, large Muslim population is
still hesitant to deal with Islamic financial institutions.
However, if these issues are resolved, the size of Islamic
Finance industry could grow enormously.
Academy for International Modern Studies, whose objective is to
facilitate individuals to become expert Islamic finance
professionals and companies to establish better Islamic
financial system, has made a significant contribution in Islamic
Finance Industry. Over the years it has maintained a purposeful
mission of promoting industry professionalism and best practices
in Islamic Banking and Finance industry through research,
consultancy, corporate trainings, seminars, workshops and
publications. AIMS also offers several certifications in Islamic
Finance, Islamic Banking and Islamic Insurance. AIMS has several
business partners globally, including United States, Canada,
United Arab Emirates, Nigeria, Mauritius, Ghana, etc. |
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<<
Past Issue:
September 2008
August 2008>> |
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Industry Growth |
The
global potential of the Islamic banking market is
"conservatively" estimated at $4,000bn, according to Moody's
Investor Service, while the current market is estimated at
only $700bn, most of it in the Gulf. With such potential it
becomes clearer why governments, eager to please their
Muslim populace, are encouraging more banks to start up and
expand outside domestic markets..
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Financial Times UK,
July
2008 |
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| Islamic
Banking News, Islamic Banking and Finance News, Islamic Finance
News, Takaful News, Islamic Banking Articles, Islamic Banking
and Finance Articles, Islamic Finance Articles, Takaful News,
Takaful Articles |
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