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An Overview of Islamic Finance

Author

Listed:
  • Mumtaz Hussain

    () (International Monetary Fund (IMF), 700 19th Street, N.W., Washington, D.C. 20431, USA)

  • Asghar Shahmoradi

    () (International Monetary Fund (IMF), 700 19th Street, N.W., Washington, D.C. 20431, USA)

  • Rima Turk

    () (International Monetary Fund (IMF), 700 19th Street, N.W., Washington, D.C. 20431, USA)

Abstract

Islamic finance has started to grow in international finance across the globe, with some concentration in few countries. Nearly 20% annual growth of Islamic finance in recent years seems to point to its resilience and broad appeal, partly owing to principles that govern Islamic financial activities, including equity, participation, and ownership. In theory, Islamic finance is resilient to shocks because of its emphasis on risk sharing, limits on excessive risk taking, and strong link to real activities. Empirical evidence on the stability of Islamic banks (IBs), however, is so far mixed. While these banks face similar risks as conventional banks (CBs) do, they are also exposed to idiosyncratic risks, necessitating a tailoring of current risk management practices. The macroeconomic policy implications of the rapid expansion of Islamic finance are far reaching and need careful considerations.

Suggested Citation

  • Mumtaz Hussain & Asghar Shahmoradi & Rima Turk, 2016. "An Overview of Islamic Finance," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-28, February.
  • Handle: RePEc:wsi:jicepx:v:07:y:2016:i:01:n:s1793993316500034
    DOI: 10.1142/S1793993316500034
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    References listed on IDEAS

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    2. Donato Morea & Luigi Antonio Poggi, 2017. "An Innovative Model for the Sustainability of Investments in the Wind Energy Sector: The Use of Green Sukuk in an Italian Case Study," International Journal of Energy Economics and Policy, Econjournals, vol. 7(2), pages 53-60.
    3. Sakarya, Burchan, 2016. "Financial Stability of Islamic (Participation) Banks in Turkey," MPRA Paper 69451, University Library of Munich, Germany.
    4. Biancone, Paolo Pietro & Radwan, Maha, 2018. "Sharia-Compliant financing for public utility infrastructure," Utilities Policy, Elsevier, vol. 52(C), pages 88-94.
    5. Zare, Roohollah, 2016. "Bank Lending Behaviour over the Business Cycle in Iran," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 11(2), pages 135-152, April.
    6. Domenico Campisi & Simone Gitto & Donato Morea, 2018. "Shari’ah-Compliant Finance: A Possible Novel Paradigm for Green Economy Investments in Italy," Sustainability, MDPI, Open Access Journal, vol. 10(11), pages 1-1, October.
    7. Nadim Kyriakos-Saad & Manuel Vasquez & Chady El Khoury & Arz El Murr, 2016. "Islamic Finance and Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)," IMF Working Papers 16/42, International Monetary Fund.
    8. Juan Carlos Martín & Carmen Orden-Cruz & Slimane Zergane, 2020. "Islamic Finance and Halal Tourism: An Unexplored Bridge for Smart Specialization," Sustainability, MDPI, Open Access Journal, vol. 12(14), pages 1-1, July.
    9. Aysan, Ahmet F. & Ozturk, Huseyin, 2018. "Does Islamic banking offer a natural hedge for business cycles? Evidence from a dual banking system," Journal of Financial Stability, Elsevier, vol. 36(C), pages 22-38.
    10. S. B. Adam* & A. M. H. Al-Aidaros & S. B. Ishak, 2018. "The Moderating Effect of Islamic Work Ethics on the Relationship Between Corporate Governance and Performance of Islamic Financial Institutions in Nigeria: A Proposed Framework," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 1041-1048:6.
    11. Sirajo Aliyu & Rosylin Mohd Yusof, 2016. "Profitability and Cost Efficiency of Islamic Banks: A Panel Analysis of Some Selected Countries," International Journal of Economics and Financial Issues, Econjournals, vol. 6(4), pages 1736-1743.
    12. Alfred Kammer & Mohamed Norat & Marco Pinon & Ananthakrishnan Prasad & Christopher M Towe & Zeine Zeidane, 2015. "Islamic Finance; Opportunities, Challenges, and Policy Options," IMF Staff Discussion Notes 15/5, International Monetary Fund.
    13. Yaakub, Nurwahida & Sherif, Mohamed, 2019. "Performance of initial public offerings (IPOs): the case of Shariah-compliant companies," Islamic Economic Studies, The Islamic Research and Training Institute (IRTI), vol. 27, pages 65-76.
    14. Shipeng Yan, 2020. "A Double-Edged Sword: Diversity Within Religion and Market Emergence," Organization Science, INFORMS, vol. 31(3), pages 558-575, May.

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