Challenges in Islamic finance are the difficulties in providing modern finance services without violation of sharia (Islamic law). [1] The industry of Islamic banking and finance has developed around avoiding riba (unjust, exploitative gains made in trade or business) by avoiding interest.
The majority of Islamic banking clients are found in the Gulf states and in developed countries that are in the muslim world.[2] The challenges include that interest rate benchmarks have been used to set Islamic "profit" rates so that "the net result is not materially different from interest based transactions".[3] giving the impression that Islamic banking is "nothing but a matter of twisting documents ....".[4]
The religiously preferred mode of Islamic finance is profit and loss sharing (PLS) but this causes several issues including that it must wait for the project invested in to come to fruition before profits can be distributed and increases the risk and complexity for financial providers.[5]
^"Shariah Law Guide". Trustnet.com.
^Cite error: The named reference Iqbal and Molyneux, p.58 was invoked but never defined (see the help page).
^Cite error: The named reference IIFTU1998:165 was invoked but never defined (see the help page).
^Cite error: The named reference IIFTU1998:166 was invoked but never defined (see the help page).
^Cite error: The named reference BSiICSAE was invoked but never defined (see the help page).
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