COMCEC Financial Outlook 2018
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2. ISLAMIC FINANCE
Islamic economics is the knowledge and application of injunctions and rules of the Shariah that
prevent injustice in the acquisition and disposal of material resources in order to provide
satisfaction to human beings and enable them to perform their obligations to Allah and to the
society.
Islamic finance focuses on adhering to Shariah standards and providing Shariah compliant
financial services and instruments. Islamic finance is becoming one of the most significant
aspects of the modern global financial system. Despite the Islamic Finance industry has grown
substantially it has mostly grown in a limited amount of regions. There is a great amount of
opportunity for the industry to grow further by increasing public awareness.
Based on the Vision and with the guiding Core Principles of the COMCEC Strategy, finance
especially Islamic finance has been an important field of study for the Financial Cooperation
Working Group that brings together the relevant experts from the Member Countries regularly
to produce knowledge, share experiences and best practices and develop a common
understanding. In this context, the Financial Cooperation Working Group prepares analytical
reports on the Islamic finance industry.
Furthermore, during the period 2018-2020 the Financial Cooperation Working group will
elaborate on different aspects of the Islamic Finance.
2.1 Concept and the Brief Modern History of Islamic Finance
While the core concepts of Islamic finance date back to the birth of Islam, the modern Islamic
finance has emerged as a modern phenomenon since the 1960s. Since then it has gained ground
in global markets and emerged as an alternative and ethical form of finance against the
conventional one. Over the years, the market and the development trend of the industry have
been shaped by certain phenomena including deregulation, increased openness of the markets,
technological change, global and regional socio-economic developments etc.
The Industry has gained a newmomentumwith the onset of the newmillennia. The efforts have
been coordinated by the global and regional communities to increase the awareness of the world
towards this new ethical form of finance. The efforts have been shaped around to provide the
recognition and acceptance of Islamic finance by the mainstream drivers of the industry. In
order for this, the standardization efforts paved the way for establishing international standard
setting bodies at the global scale and regulation and legal environment created by local
authorities. Another historic juncture for the development of the industry has been the global
financial crisis of 2009. Since the core pillars of Islamic finance require a ban on speculation,
asset-backing principle, risk-sharing etc., the industry has proved its soundness and maturity
against the financial crises. Therefore, Islamic finance has been recognized as part of global
finance with its growing customer base, asset size, diversified instruments, and geographical
spread.
Islamic finance has emerged as an effective tool for financing development worldwide, including
in non-Muslim countries. Major financial markets are discovering solid evidence that Islamic
finance has already been mainstreamed within the global financial system. The Islamic finance
industry has expanded rapidly over the past decade, growing at 10-12% annually and total
assets are estimated at roughly USD2 trillion, covering bank and non-bank financial institutions,