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Islamic Banking Controversies and Challenges


  • Raza, Muhammad Wajid
  • Shah, Syed Farhan
  • Khurshid, Malik Rizwan


The concept of interest free financing was practiced by Arabs prior to the advent of Islam, and was later adopted by Muslims as an acceptable form of trade financing. While the system had been used on a small scale for centuries, its commercial application began in 1970. Many countries in the world are now experiencing dual banking system, where the banks are involved in alternative form of banking along with conventional banking. Islamic Banking is based on two main pillars; one is economic Philosophy of Shariah and second is monetary theory of Islamic economics. Despite a substantial growth of Islamic banking in the last decade, there is not every thing right. There are some controversies and challenges which are prevailing about different concepts of Islamic banking and which need to be addressed. This paper basically examines and explores the different controversies which are in the minds of people which need to be addressed. The author has also tried to suggest suitable solutions to overcome these challenges and controversies.

Suggested Citation

  • Raza, Muhammad Wajid & Shah, Syed Farhan & Khurshid, Malik Rizwan, 2011. "Islamic Banking Controversies and Challenges," MPRA Paper 70623, University Library of Munich, Germany, revised Jan 2012.
  • Handle: RePEc:pra:mprapa:70623

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    Cited by:

    1. Shujaat Saleem & Fadillah Mansor, 2020. "Exploring Compliance of AAOIFI Shariah Standard on Ijarah Financing: Analysis on the Practices of Islamic Banks in Malaysia," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(2), pages 1-13, February.
    2. Saïda Daly & Mohamed Frikha, 2016. "Islamic Finance: Basic Principles and Contributions in Financing Economic," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 7(2), pages 496-512, June.
    3. Dinc, Yusuf, 2016. "A Suggestion on Mortgage Financing of Islamic Banks: Diminishing Musharakah," MPRA Paper 85335, University Library of Munich, Germany, revised 07 Feb 2017.

    More about this item


    Islamic Banking and Finance; Interest; Monetary Theory of Islamic Finance; Riba;

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages


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