Islamic Banking Processes And Products - Oracle
Islamic Banking Processes and ProductsKey Regional VariationsORACLE WHITE PAPER SEPTEMBER 2017
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Table of ContentsIntroduction2Global Market for Islamic Banking3Islamic Banking Market Drivers4Focus on Sustaining the Momentum4Common Principles of Islamic Banking5Islamic Banking Variations across Geographies5Islamic Bank Offerings across Geographies6Deposits6Financing7Treasury9Trade Finance10Conclusion10Annexure: Key concepts in Islamic Banking111 ISLAMIC BANKING PROCESSES AND PRODUCTS
IntroductionWith over two decades of existence, Islamic banks have been extending their reach, in terms ofproducts and services offered as well as geographically. Islamic banks have been making a concertedeffort to match the service levels and scale of operations of conventional banks. From definingproducts to comply with Islamic banking regulations, educating customer, setting-up operationalprocess, today Islamic banks operates and functions on par with conventional banking creating acompetitive market in most of the Islamic countries.Islamic banking is gaining market share at the expense of conventional banking system and is alsohelping replace the shadow economy. Over the past four years, in which conventional banks havebeen facing decelerating growth rates, Islamic Banks have recorded an average annual growth rate of14% during 2010 - 2015, which is 50% more than the growth rate of the overall banking sector in thesame period (World Islamic Banking Competitiveness Report FY16 by Ernst & Young).Penetration and presence of Islamic banking is positively supporting Financial Inclusion in manyIslamic countries. With more acceptance and increasing need for banking amongst Islamic population,many countries are promoting financial inclusion through Shari’a compliant financial institutions. Alsoas young Islamic population getting globally connected and are also concerned about preserving theirnational and Islamic practices, Islamic banking is getting more traction amongst consumers.Economic conditions in many Islamic countries coupled with the consistent growth in oil and gasrevenues in the Middle East create more viability for Islamic Banking. This in-turn is also creatingacceptance of Islamic Banking in high-growth emerging markets and European countriesIslamic banking has spread extensively over the years to span multiple geographies. The regionsexperiencing significant growth are Middle East, South Asia and North Africa, the obvious reasonbeing the larger number of followers of Islam in these regions. However, to bundle these regionstogether on the basis of the same religion would be an oversimplification. Even within these regions,significant disparities exist between the products and processes of Islamic Banking.This paper intends to examine these differences across geographical boundaries and the reasons andimplications of these differences.2 ISLAMIC BANKING PROCESSES AND PRODUCTS
Global Market for Islamic BankingIslamic banking, beginning from the Middle East, has grown into a worldwide phenomenon with Islamic financialinstitutions now operating in more than 80 countries worldwide. According to Ersnt and Young’s World IslamicBanking Competitiveness Report, FY16, Islamic banking assets with commercial banks globally will grow to US 1.8trillion by 2020 from US 920 billion in 2015.Market share of Islamic Finance Banking Assets, 2015Saudi 7%TurkeyIndonesia5.8%3.8%Bahrain 1.7%Pakistan 1.2%Rest of World6.3%Source: Ersnt and Young’s World Islamic Banking Competitiveness Report, FY16The most significant players remain the GCC countries consisting of Saudi Arabia, Kuwait, the United ArabEmirates, Qatar, Bahrain, and Oman, which account for the vast majority of Islamic Banking assets. Islamic Bankingis also making progress and seeing faster growth in countries such as Malaysia, Indonesia, Turkey and Pakistan.Recently, new jurisdictions introduced legislative or regulatory enhancement to enable Islamic banking. Libya, Iraq,Tunisia, Kenya and Nigeria are among the countries showing keen interest in opening up to Islamic banking. Withthe developing economies rising need for alternative investments and financing, and growing Muslim population, theSub-Saharan Africa region is also showing more potential for Islamic finance. Apart from the region’s establishedmarket Sudan, Nigeria, Kenya and South Africa are introducing new measures to make way for Islamic financialmarkets.Islamic Banking is in a very nascent stage in European countries. Turkey, the UK and France, and are considered alow penetration of retail Islamic banking compared to the relatively large number of potential Muslim retailcustomers. Europe has been able to position itself as a popular destination for Sukūk. Several financial centres inEurope are already on the radar to compete as regional Islamic financial hubs. This positive development isexpected to generate greater intensity and activities of Islamic finance in the region.3 ISLAMIC BANKING PROCESSES AND PRODUCTS
Islamic Banking Market DriversThe market for Sharia-compliant financial services will continue to grow, driven by both demand and supply factors.On the demand side, not just retail customers but, increasingly, corporations also want to conduct all financialtransactions in accordance with Sharia. The changing demographics of Muslim countries will also drive the demandfor Sharia-compliant financial services. Many Muslim countries have young populations, with more than 50 percentof the people under 21, coupled with population growth rates of more than 3 percent per year. Many conventionalbanks today are also entering the Islamic Banking space due to its inherent characteristic of low exposure to risk.Islamic banking, due to its stringent Sharia compliance norms, can help customers minimize the risks associatedwith interest based debt financing and easy credit, which plagued conventional banks during the sub-primemortgage crisis.The overall economic growth in Muslim countries will drive the growth of Islamic financial services, leading to furthergrowth of Sharia-compliant banking. This is particularly relevant in the oil-rich countries of the Gulf where stateowned enterprises, which tend to strictly adhere to Sharia.On the supply side, the main driver of growth in Islamic banking is the increasing number of financial servicesinstitutions offering Sharia compliant solutions. In addition to the new Islamic banks that are being formed, there isan emerging trend among existing conventional banks to convert their operations to become Sharia compliant. Withincreasing competition in their home markets, a number of Islamic banks in the Middle East have started to expandglobally, with an initial focus on Asia and Africa. This increased competition is leading to new innovative productsbeing offered making Islamic banking more attractive.Focus on Sustaining the MomentumIslamic banking system is entering a new era as the markets are getting mature and banks have started focusing onadopting core transformation to sustain and grow business. Islamic banks are also focusing on customers,profitability and efficiency. Some of the major focuses to sustain the momentum are:Optimize CapitalCapital requirement for Islamic banks is expected to further increase by 25–40% and the pressure for enough liquidassets and stable funding will be significant. 17 major Islamic banks have US 1bn or more in equity and sufficientregulatory capital. This provides for a good platform for organic and acquisitive growth (World Islamic BankingCompetitiveness Report 2013-2014 by Ernst & Young).Efficient utilization of capital will become more critical for sustainable growth. Islamic banks will focus on maximizingreturns on each unit of capital invested. A cultural change has to happen through introduction of risk-basedperformance measurement.Stress upon impact of Shari’a complianceIslamic banks have been spending more in terms of money and effort in building operational transformationprograms to get better profitability. Islamic banks will have to take initiatives to transform from being a legally Shari’acompliant banking, to demonstrating the impact of Sharia compliant system on customers and economies.Recently banks have started adopting AAOIFI standards (Accounting and Auditing Organization for Islamic FinancialInstitutions) which can help financial institutions maximize their comfort with Sharia compliance. AAOIFI standardsare officially adopted by a number of central banks and financial authorities on a mandatory basis or as guidance.4 ISLAMIC BANKING PROCESSES AND PRODUCTS
InternationalizationRecently, new jurisdictions introduced legislative or regulatory enhancement to enable Islamic banking. Libya, Iraq,Tunisia, Kenya and Nigeria are among the countries showing keen interest in opening up to Islamic banking. Islamicbanks should capitalize on this to expand into new markets for getting better economies of scale.Adopt customer centric approachManaging customers is the buzzword in the banking industry and this requires developing a 360 - degree view of therequirements and doing it profitably. To achieve this, Islamic banks will have to move away from a product centricmindset to a customer centric model with an integration capability across channels for a seamless service offering.Comprehensive reforms in risk managementWith the fast changing perception on risk management, the need is to adhere to risk practices. Although Islamicbanks have successfully weathered the storm of 2008, the regulatory bodies require banks to implementcomprehensive reforms in the risk space. The demands from the risk governance bodies start from the strategicplanning stage and cover areas of capital and liquidity management, data and IT infrastructure management,security system and reporting requirements. By addressing these demands, Islamic banks can shore up theirbusinesses and counter any possible competition from traditional banks, some of whom are yet to recover from theirfinancial stress.Tap new customer segmentsIslamic banks also have to tap into customer cross-selling opportunities and provide segmented offerings to sustainand be competitive in the market. Increasing average product holding from an industry average of 2.1 to a classleading 4.9 can increase profitability by 40% from new customers. For some Islamic banks, the impact on ROEcould be as high as 5% (Ernst & Young).Common Principles of Islamic BankingThe basic tenets and principles of Islamic banking are built upon the avoidance of Riba, Gharar and the prohibitionof impermissible businesses as stated in the Quran. Banking models are built upon the foundation of compliancewith Sharia (Islamic law). Riba is generally the same concept of interest, or usury, and is therefore unlawful andforbidden. Instead of Riba, the concept of profit and loss sharing is practiced; essentially the concept of sharing risk,as opposed to transferring it. Gharar is the ambiguity and uncertainty present in a contractual relationship, to theextent that it might provide one of the parties of a contract with an unfair advantage over the other.Islamic Banking Variations across GeographiesSharia compliance is at the core of the activities for any bank intending to launch Islamic products. The Shariacompliance is ensured or verified by bank’s own Sharia boards with Sharia scholars on them; and/or by Shariaboards of Central banks. However, Sharia scholars are currently spread too thinly across numerous institutions.Compounding the present difficulty of finding scholars is that there is a difference in opinion on Sharia interpretationsamong Sharia scholars. There are differing opinions of how to apply or interpret Sharia law amongst the differentbanking regions, notably between the Middle East and Malaysia. Also, currently there are a number of regulatoryframeworks within which Islamic banking is developing. These frameworks and rules can often be contradictory andlead to differences in the application compliance.5 ISLAMIC BANKING PROCESSES AND PRODUCTS
Islamic Bank Offerings across GeographiesIslamic banks worldwide traditionally offer four categories of financial contracts: Deposits, Lending, Treasury andTrade Finance. The following sections provide a comparative evaluation of Islamic Banking offerings acrossgeographical regions.DepositsPRODUCT/PROCESSMIDDLE EASTNORTH AFRICAMALAYSIAINDONESIASavings Account basedon:Mudharabah and Qardare standard offeringsMudharabah and Qardare standard offeringsWadiah is more popularthan MudharabahMudharabah is mostpopular, followed byWadiahCurrent Account basedon:Qard and Mudharabahare standard offeringsQard and Mudharabahare standard offeringsOnly Wadiah is offeredto customersOnly Wadiah is offeredto customersFixed Deposit based on:All three are popularproducts, especiallywithin GCC countriesAll three are popularproductsMudharabah is thestandard offering.Commodity Murabahaand Walakah aregradually becomingmore popularOnly Mudharabah isbeing offered tocustomersRecurringDeposits/Saving Plan toincrease depositsPopular scheme offeredto customers as a“forced saving plan”Popular schemeSlow take-up as Takafulunit-linked plan is moreattractive to customersPopular scheme toencourage saving forHajj and EducationStructured ProductsProducts are offered toselected customersProducts are offered toselected customersProducts are offered toselected customersNot offered to public yetProfit DistributionAdopt guideline issuedby AAOIFI onMudharabah-basedproductsAdopt guideline issuedby AAOIFI onMudharabah-basedproductsAdopt guideline issuedby AAOIFI but morerefined and complexRevenue-based(instead of profit based)but less complexLiquidity ManagementStandard offering whenbanks promote theircash managementservices to commercialand corporatecustomersEmerging requirementsSame as ME and AfricaEmerging requirementsin Indonesian marketMurabaha6 ISLAMIC BANKING PROCESSES AND PRODUCTS
Fund Management(Allowing banks tocreate multiple funds orpools meant for specifictarget customers)Very populararrangement whereincustomers can placedeposits into variousfunds based on theirrisk preferences andexpected returnsPopular arrangementwherein customers canplace deposits intovarious funds based ontheir risk preferencesand expected returnsLow demand fromcustomers. However,non-bank financialinstitutions (NBFI) anddevelopmental banksare using this capabilityto manage borrowingsor “special allocation”received from banksand governmentagenciesEmerging requirementsbut take up fromcustomers is lowFinancingPRODUCT/PROCESSMIDDLE EASTNORTH AFRICAMALAYSIAINDONESIAMonetization Products(Cash finance based onTawarruq and SalamSalam structure ispreferred as Tawarruqis discouraged byscholarsSalam structure ispreferredVery popular schemebased on TawarruqconceptBoth Tawarruq andSalam structures arenot approved byscholarsVehicle Financing(Murabaha and Ijarah)Standard offeringStandard offeringStandard offeringStandard features,some are managed bymulti-finance outfitsHouse Financing(Murabaha, Ijarah andDiminishing Musharakh)Only Ijarah andDiminishing Musharakhare popularOnly Ijarah andDiminishing Musharakhare popularOnly Murabaha andDiminishing Musharakhare popularOnly Ijarah andDiminishing Musharakhare popularPawn Broking (AlRahnu)Prohibited productProhibited productPopular, as a form ofpersonal financing withgold as collateralPopular form offinancing with gold Financial)based on Ijarah conceptOperating and financialleases are popularOperating and financialleases are popularMostly financial leaseMostly financial leasePlant/Constructionfinancing using Istisnaqand forward IjarahBoth structures usedbut forward Ijarah ispopularForward Ijarah ispopularIstisnaq and forwardIjarah are prevalentIstisnaq structure ismore popularProject Financing basedon Musharakah andDim Musharakah andMudharabahPopular form offinancingPopular form offinancingBanks not keen to offeras deemed too riskyPopular form offinancingWorking capitalfinancing based onTawarruq , Mudharabahor MusharakahMudharabah andMusharakah offered butnot Tawarruq as it isprohibitedMudharabah andMusharakah offered butnot Tawarruq as it isprohibitedOnly Tawarruq is beingoffered by banksMudharabah andMusharakah offered butnot Tawarruq as it isprohibited7 ISLAMIC BANKING PROCESSES AND PRODUCTS
Syndication origination,processing and supportBasic requirements.Subscription receivedunder Musharakah andother structuresBasic requirements.Subscription receivedunder Musharakah andother structuresSyndication mimicsarrangement inconventional usingSharia compliantstructuresBasic requirements.Subscription receivedunder MusharakahRebate processingRebates are given atend of financing or atredemptionRebates are given atend of financing or atredemptionRebates are givenduring or at end offinancingRebates are given atend of financing or atredemptionPenalty chargingPenalty charged isalways given to charityPenalty charged isalways given to charityPenalty charged istreated as income, andif above a threshold tobe given to charityPenalty charged istreated as income, andif above a threshold tobe given to charityAsset securitization(Selling of financingassets to other parties)Practice is nowemergingNot PrevalentThis is common practicein Malaysia wherein agovernment body buysmortgages from banksto enhance liquidityRequirement is beingdiscussed but is yet tobe approved by theSharia scholarsRescheduling andrestructuringComplete flexibilityrequired, especially forcorporatesComplete flexibilityrequired, especially forcorporatesComplete flexibilityrequired, especially forcorporates and VVIPsLess complexrequirements than ME,Africa and MalaysiaCollectionExternal collectors andlawyers are usedextensively by banksand they form part ofthe eco-system andmust be monitoredcloselyExternal collectors andlawyers are usedextensively by banksand they form part ofthe eco-system andmust be monitoredcloselySame as ME and AfricaLess complexrequirements.Collections are mostlyhandled by internalcollectorsAssets TakeoverVery popular scheme asthis helps reducecomplexity and totransfer assets tobanks’ booksPopular scheme as thishelps reduce complexityand to transfer assets tobanks’ booksSame as ME and AfricaSame as ME and AfricaOrigination – Retail(Ijarah, Istisna,Mudharabah,Musharakah, Murabahaand Tawarruq)Advanced requirementsto address competitivelandscape includingDoc Mgmt, CreditScoring and CreditControl beforedisbursementAdvanced requirementsto address competitivelandscape includingDoc Mgmt, CreditScoring and CreditControl beforedisbursementSame as ME and AfricaRequirements are stillbasic. However, futurerequirements maymatch that of ME andAfrica8 ISLAMIC BANKING PROCESSES AND PRODUCTS
Origination – Corporate(Ijarah, Istisna,Mudharabah,Musharakah, Murabahaand Tawarruq)Advanced originationfeatures for variousbusiness requirementslike Project finance,Working capitalFinancing, Termfinancing includingFinancial analysis,workflow definition, DocMgmt, Credit Scoringand Credit Controlbefore disbursementAdvanced originationfeatures for variousbusiness requirementslike Project finance,Working capitalFinancing, Termfinancing includingFinancial analysis,workflow definition, DocMgmt, Credit Scoringand Credit Controlbefore disbursementSame as ME and AfricaRequirements are stillbasic. However, futurerequirements maymatch that of ME andAfricaTreasuryMIDDLE EASTNORTH d requirements.Forward deals are notallowedStandard requirements.Forward deals are notallowedStandard requirements.Forward deals are notallowedStandard requirements.Forward deals are notallowedMoney MarketMoney market is activebut products are lesscomplex due to strictrules imposed by theSharia scholarsMoney market is activebut products are lesscomplex due to strictrules imposed by theSharia scholarsMoney market is veryactive and many uniqueproducts based onMudharabah,CommodityMudharabah and otherstructures are offeredby central banks andgovernment agenciesStandard requirements,very basic instrumentsbased on Mudharabahare offered. CommodityMudharabah is yet to beoffered in the marketSecuritiesGovernment papers andSukuk offered bygovernment and largecompanies are thetypical securities tradedGovernment papers andSukuk offered bygovernment and largecompanies are thetypical securities tradedActive market eventhough players buy forinvestment rather thantrading. Active repomarket as wellOnly governmentpapers are traded. Verylimited Sukuk and otherinstrumentsDerivativesVery limited derivativesproducts due to strictruling by ShariascholarsNot Yet AvailableMore advanced thanMiddle East and Africa.Profit and Currencyswap derivatives havebeen seen in the marketNo derivative-basedproduct in the market9 ISLAMIC BANKING PROCESSES AND PRODUCTS
Front OfficeStandard front-officefunctionalities tofacilitate dealers in theirtrading daily, with goodsupport for allinstruments available inthe marketStandard front-officefunctionalities tofacilitate dealers in theirtrading daily, with goodsupport for allinstruments available inthe marketSame as ME and AfricaSame as ME and AfricaMiddle OfficeStandard middle officefunctionalities to ensuredealing risks areminimized and all limitsare properly assignedand controlledStandard middle officefunctionalities to ensuredealing risks areminimized and all limitsare properly assignedand controlledSame as ME and AfricaSame as ME and AfricaBack OfficeStandard back-officefunctionalities tofacilitate completion ofdeals, sending ofnotices and swiftmessages totransacting parties andto handle all accountingentries and reportingStandard back-officefunctionalities tofacilitate completion ofdeals, sending ofnotices and swiftmessages totransacting parties andto handle all accountingentries and reportingSame as ME and AfricaSame as ME and AfricaMIDDLE EASTNORTH AFRICAMALAYSIAINDONESIATrade FinancePRODUCT/PROCESSComplete LCProcessing based onMurabaha, Wakalahand MusharakahConceptsStandard requirementsdue to UCP practicesStandard requirementsdue to UCP practicesSame as ME and AfricaSame as ME and AfricaBillsStandard requirementsdue to UCP practicesStandard requirementsdue to UCP practicesSame as ME and AfricaSame as ME and AfricaGuaranteesStandard requirementsdue to UCP practicesStandard requirementsdue to UCP practicesSame as ME and AfricaSame as ME and AfricaComplete LCProcessing based onMurabaha, Wakalahand MusharakahConceptsStandard requirementsdue to UCP practicesStandard requirementsdue to UCP practicesSame as ME and AfricaSame as ME and AfricaConclusionThe rapid pace of growth of Muslim population worldwide present a lucrative window of opportunity for IslamicBanking. However, banks need to examine the key location-specific factors while offering Islamic Banking productsand develop targeted offerings based on the unique needs of a region.10 ISLAMIC BANKING PROCESSES AND PRODUCTS
Annexure: Key concepts in Islamic BankingHibah: This is a token given voluntarily by a debtor to a debitor in return for a loan. Hibah usually arises in practicewhen Islamic banks voluntarily pay their customers a 'gift' on savings account balances, representing a portion ofthe profit made by using those savings account balances in other activities.Ijarah: Ijarah means lease, rent or wage. Generally, the Ijarah concept refers to selling the benefit of use or servicefor a fixed price or wage. Under this concept, the Bank makes available to the customer the use of service of assets/ equipments such as plant, office automation, motor vehicle for a fixed period and price.Istisna: In an Istisna sale, the buyer asks the manufacturer to create a specific commodity with material from themanufacturer. The price is fixed after all parties give their consent and agree on all the necessary specifications ofthe commodity.Murabaha: Murabaha is a sale with an agreed-upon profit margin.Mudharabah: In Mudharabah, the customer provides funds to the bank, which then invests the funds into variousinvestment schemes and financing.Musharakah (Investments): Musharakah means “to share.” In a banking context, it indicates that all profits or lossesare shared equally.Qard: Qard transactions are loans without profit. The borrower is required to repay only the principal amountborrowed but may pay an extra amount as a token of appreciation at the borrower’s absolute discretion. Qardcontracts can also be used to support current accounts, in which customers lend the money to the bank. The bankgenerates profit on this loan and returns the capital and some of the profit it has obtained.Salam: Salam is a sale in which the seller supplies specific goods to the buyer at a future date in exchange for aprice fully paid in advance. It is typically used to finance agriculture. The bank must take delivery of the commodityon maturity and it can enter into a parallel contract of Salam with another party to sell the commodity on the futuredate. (It is prohibited to sell the commodity to the original party.)Takaful (Islamic Insurance): Takaful is an alternative form of cover that a Muslim can avail himself against the risk ofloss due to misfortunes. Takaful is based on the idea that what is uncertain with respect to an individual may ceaseto be uncertain with respect to a very large number of similar individuals.Tawarruq: Tawarruq is a finance method with which one can raise loan financing through buying installments in alocal commodity owned by the bank. Applicants then authorize the bank to sell their share in this commodity, ontheir behalf, to a third party for cash and then deposit the proceeds into his account.Sukuks: Sukuks are Islamic bonds that must be linked to an underlying asset. Banks cannot raise funds by issuinggeneric fixed or floating coupon-bearing bonds. Banks can securitize a stream of cash flows from Ijarahs orMurabahas and then issue Sukuks. The coupon cash flow for these Sukuks can be the cash flow from theunderlying Ijarahs or Murabahas, for example.Wadiah: In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank andthe bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when thedepositor demands it. The depositor, at the bank's discretion, may be rewarded with Hibah as a form of appreciationfor the use of funds by the bank.11 ISLAMIC BANKING PROCESSES AND PRODUCTS
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acceptance of Islamic Banking in high-growth emerging markets and European countries Islamic banking has spread extensively over the years to span multiple geographies. The regions experiencing significant growth are Middle East, South Asia and North Africa, the obvious reason being the larger number of followers of Islam in these regions.
The Evolution of Islamic Banking System in Muslim countries: Before describing the evolution of the Islamic banking it is important to understand what Islamic banking is and what are its principles or features. 1.1) What is Islamic Banking? Islamic Banking is banking or financing activity that is based on Shariah (Islamic Law) and all
Products offered by Islamic Banking Branches of Conventional Banks 61-129 4 Important terms on Islamic Banking 130 Disclaimer: The document is prepared for general information only. The information provided in this document is subject to change by the Islamic Banking Institutions (IBIs) and may not exactly match the IBI's
Islamic Banking Bulletin October - December 2020 1 Progress & Market Share of Islamic Banking Industry Overview During the quarter under review (October-December 2020), the asset base of Islamic Banking Industry (IBI) grew by 12.1 percent (Rs. 461 billion) and reached Rs. 4,269 billion. Similarly, the
based banking and Islamic banking as largely discussed by numerous scholars and researches. Conversely, ethical banking is essentially believed to be a concept which comprises of a banking system that embraces environmentally and socially conscious practices. Wilson (1997) deliberate that ethical investment products is a
Islamic Grave Voodoo 57 Allah Will Grow Humans from their Graves 57 Islamic Interrogation in Graves 58 Islamic Torment in Graves 59 Islamic Rewards in Graves 61 CHAPTER 8 63 Islamic Medicine Voodoo 63 Islamic Cauterizing and Cupping 63 The Qur'an and Honey are Cures for All Illness 65
Answer: Islamic banking is defined as banking system which is in consonance with the spirit, ethos and value system of Islam and governed by the principles laid down by Islamic Shariah. Interest free banking is a narrow concept denoting a number of banking instruments or operations which a
Introduction 3-1 3. Introduction Islamic Banking is a banking system that is based on the principles of Shariah (Islamic law) and guided by the Islamic economics. The Shariah Laws provide guidance on each and every aspect of human life, and the laws which govern and guide financial and commercial transac
stakeholders. The value of global Islamic banking assets reached an estimated USD1.48tln as at 1H2014, having recorded a CAGR of 16.89% between 2008 and 2013. The largest Islamic banking markets are in in the Middle East and North Africa (MENA) region and Asia: MENA (ex-GCC) accounts for 42.9% of the total Islamic banking assets worldwide; the Gulf
