Islamic Finance has been one of the fastest growing fields in the entire financial history of the world. As per Movassaghi and Raquibuz (2001), there were 166 Islamic banks and financial institutions in the world in 1996, with a total asset base of $137 billion, deposits of around $100 billion and paid-up capital of $7.3 billion. Last ten years have witnessed a phenomenal growth rate in Islamic financial institutions� performance. As per the recent statistics provided by The International Islamic Finance Forum (2007), there are 270 Islamic banks worldwide having $265 billion assets, financial investments of around $400 billion, and deposits of $202 billion. This sheer increase in the number of banks and their market capitalisation is a point of concern for financial analysts and public in general. Is it a short lived tale, is it here to stay, what could be the determinants of such high growth, will this growth continue, and what could be some of the challenges it will face in years to come. These are all questions that arise in any mind that sees a growth of such magnitude and intensity, in such short period of time.
Islamic finance is not an entirely new field. Its roots go back to 1400 A.D. when it was first introduced by the prophet of Islam as a mandatory mode of financial activities in contrast to then prevalent interest based system. The first Islamic bank, however, was established in 1963 in Egypt. The recent boom of Islamic finance has been attributed to three different reasons by Mohammed El Qorchi (2005).
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The financial distress of the last two decades has revived interest on the question of the stability of the financial system. On the one hand, the "pessimist" view, associated primarily with Minsky argues that not only that the financial system is prone to such crises ("financial fragility" in Minsky's terms) but also that such crises are inherent on the capitalist system ("systemic fragility"). ...
These include �the strong demand from a large number of immigrant and nonimmigrant Muslims for Sharia-compliant financial services and transactions, growing oil wealth with demand for suitable investments soaring in the Gulf region, and competitiveness of many of the products, attracting Muslim and non-Muslim investors�. Today, there are many products that Islamic financial institutions offer. These include Musharakah, Murabahah, Ijara, Salam, Istisna and others (Usmani 2005).
Many scholars and analysts have discussed the reasons for increasing growth rate in Islamic financial institutions. As Usmani (2005) puts it, �Even the non-muslim financial institutions are entering into the field and trying to compete with each other to attract as many Muslim customers as they can�. Similar comments are made by Fletcher (2005) through his analysis after conducting a series of interviews with renowned bankers. Islamic Financial Services Board (IFSB) develops the banking policies, codes and rules for Islamic banking operations (IFSB.org, 2007).
Although it enjoys an old start, yet Islamic finance remains a relatively new field in contemporary financial markets; and as such, faces critical challenges towards sustaining the high growth rate. A broad level overview was undertaken by an anonymous reporter at Khaleej Times (2005) in which the reporter tries to explain the nature and types of challenges that Islamic financial institutions face today. These include shortage of experts, absence of accounting and auditing standards, lack of uniform standards for credit analysis, lack of appropriate instrument and others.
The above analysis provides silos of information and current analysis about the reasons for this huge leap by Islamic banks and financial institutions, and the problems these face in modern day world. However, there is little evidence of a proper in-depth analysis or research on this very important topic. Hence, the research question for the proposed research is:
�The reasons and challenges faced by recent growth of Islamic finance�
As it is evident, the growth of Islamic finance in recent years is mainly due to the perceptions, beliefs, objectives and actions of people towards embracing this relatively new form of financial system, and contributing to its popularity. This has been the source of continuous development and growth for Islamic finance in modern times. Hence, the most suitable research method to collect data and perform analysis will be �survey(s)�. As Boone (2004) stated �conducting a survey is often a useful way of finding something out, especially when human factors are under investigation�. The surveys will be conducted using both structured review and questionnaires, depending on the availability of respondents. Garson (2007) views survey research to be �a method of gathering data from respondents through to be representative of some population�. In order to collect different perspectives and to minimise survey error, the survey respondents will be chosen from commercial banks, Islamic banks, and general public. This will provide an unbiased insight about the thought process, decision metrics, and multi-perspective views of the stakeholders. The raw survey data will be analysed using statistical processes including mean and variance to arrive at the conclusion about how stakeholders view the evolution and growth of Islamic finance and the challenges it faces towards achieving sustainability and high market share. In addition, secondary research will be carried out through various sources like newspapers, books, journal articles and websites. This will ensure comprehensive coverage of all domains to answer the research question.
The Term Paper on Financial Statement Analysis of Square Pharmaceuticals Ltd
? University of Dhaka Faculty of Business Studies Department of Finance Course Title: Financial Accounting and Reporting Course Code: F – 504 Submitted By: Sifat Monjur Shamrat Roll: 24040 Submitted To: Samia Sultana Tani Assistant Professor Department of Finance Faculty of Business Studies University of Dhaka Date of Submission: Sunday, August 18, 2013 August 18, 2013 To Samia Sultana Tani ...
The research will cover an in-depth analysis of the underlying elements that have allowed Islamic finance to get a jump-start in the midst of traditional interest based financial industry. Another purpose of the research is to study and analyse challenges and problems that Islamic banks face in terms of lack of domain expertise, auditing and accounting principles and other factors; and to propose practical solutions for these issues. This report is intended to serve as a value added source of information and market research about the topic that can be used by a potential new Islamic bank as starting point to develop studies on market absorbance and potential in terms of capitalisation. It will also help to identify the target market. Since, there is lack of up-to-date information and research work in this area, the research report can also be used by existing Islamic and non-islamic financial institutions and general public as a current and comprehensive industry analysis.
The Business plan on Financial Analysis of Singtel
As my research and analysis project topic chosen is the ‘Topic 8: An analysis of business and financial performance of an organization over a three–year period’, I have selected Singapore Telecommunications Limited (SingTel) to be my research organization from 1 April 2007 to 31 March 2010. Business analysis is the discipline of identifying business needs and determining solutions to business ...
The research process has three main phases, vis-à-vis development of surveys and questionnaires suited to three groups of respondents, conducting actual surveys and collecting data, and analysing the data to answer research question. A tentative time-scale for the entire research is around fifteen weeks to account for data gathering from approximately ten participants from each group of stakeholders, and consolidation of results.
Being the son of a prominent Islamic scholar, who laid down the foundation for Islamic finance at a large multinational bank, the author is well versed in Islamic economy concepts and has prior knowledge in Islamic financial system and operations of Islamic banking. These concepts will assist in a knowledgeable discussion with Islamic and traditional bankers and general public towards achieving the research outcome in the real-life scenario over and above the theoretical underpinnings of an Islamic financial system and its functions.
To conclude, this research is in no way an attempt to identify and resolve all the problems associated with implementation and operations of Islamic finance and banking system. It will only serve to flag areas that require appropriate response from various stakeholders to establish a controlled environment which can nurture this relatively new system. In addition, the research report will also identify the factors and will discuss the reasons for such tremendous growth in this field as stated above and whether this growth is sustainable in future.
Works Cited
Boone, Kevin. How to Conduct a Survey. 8 July 2004. The K � Zone. 25 April 2007
Garson, G. David. Survey Research. 2007. College of Humanities and Social Sciences. 25 April 2007
The Business plan on Financial Ratios and Stock Return: Evidence on selected Plantation Companies in Malaysia
UNIVERSITI MALAYSIA SARAWAK (UNIMAS) SEMESTER 2 2012/2013 FACULTY OF ECONOMICS AND BUSINESS (FEB) EBF 3183 FINANCE SEMINAR (Group ASSIGNMENT) Financial Ratios and Stock Return: Evidence on selected Plantation Companies in Malaysia NAME:VICTORIA AK JUTI 28578 VENOSHNI A/P MANOGARAN 28577 PHUA WEE WEE 27952 TEOH CHIEN NI 28513 LING LING26752 GROUP:1 PROGRAMME:FINANCE Financial Ratio and Stock ...
Hormoz Movassaghi, M. Raquibuz, (2001), A Performance Analysis, Islamic Banking, 31-38
Islamic Financial Services Board. Welcome to Islamic Financial Services Board Website. 2007. 25 April 2007
Mohammed El Qorchi, (2005), �Islamic Finance Gears Up�, Finance and Development, Volume 42, Number 4, http://www.imf.org/external/pubs/ft/fandd/2005/12/qorchi.htm
Patrick Fletcher, (2005), Building Retail Interest, Structured Products, http://db.riskwaters.com/global/risk/foreign/islamic_finance/pdfs/Is_risk_14-16.pdf
Staff Reporter Khaleej times, Business times (2005), �Challenges facing Islamic Financial Institutions�, khaleej times, http://www.khaleejtimes.com/DisplayArticle.asp?xfile=data/business/2005/August/business_August104.xml§ion=business&col
The International Islamic Finance Forum. Facts and Figures. 2007. 25 April 2007
Usmani, Taqi, M. An Introduction to Islamic Finance.Karachi: Mehran Printers Maktaba Ma�ariful Quran, 2005.
