Financial Intermediation in Muslim Community: Issues and Problems

It is widely known that Muslim society inherited an interest based financial intermediation system from others instead of developing their own banking system. However, Muslim Economists and scholars around the world made efforts to have and develop their own financial intermediation since there was no initial working model to act upon, except the belief that interest-based financial intermediation might be replaced by an Islamic one on the basis of profit-and loss sharing. During the last four decades, Islamic financial intermediation industry became a reality that the Muslim society around the world can see and practice. However, the Islamic financial intermediation in the world has been facing numerous problems of challenges. It raises a number of issues and potential problems which can be seen from the macro and micro operational point of view. Developing the Islamic financial intermediation depends on clarifying these issues and presenting them in order to focus on them studying and remedying. This paper aims to cover the ground of issues of Islamic financial intermediation that rose during its short age. Such issues prevent Islamic financial intermediation from its operating with its full efficiency level. Even no attempt to remedy these issues, presenting these issues and problems and classifying them according to their type is very valuable for sustained growth and development of the Islamic financial intermediation. Such work is a valuable contribution to build the Islamic financial intermediation industry on sound theoretical foundations.