Question

Answer the question below Please in 150 - 200 words atleast

1. Explain the emergence and growth of Islamic banking in various regions of the world?

Answer 1

Islamic banks have emerged over the last four decades and witnessed remarkable growth in terms of numbers of new Islamic banks being established all over the world.

The early institutions have now matured, and have achieved a considerable degree of success in terms of market penetration.

The emergence of Islamic banks has created a new frontier in financial intermediation industry, where the nature of Islamic banks that provides more alternative banking service based on equity-based, debt-based and fee-based. Islamic banking develops its alternative mode of financing in line with the needs of today's financing needs of its clients.

In present Islamic banks face constraints on its financing mechanism. Murabaha debt-based financing was the main source of income for Islamic banks. The situation worsens further during the bad economic condition where debt-based financing ceases.  

Thus the ongoing effort to develop the Islamic banking system that is able to sustain and grow with the use of equity-based financing musharakah and mudarabah should become a collective measure to all Islamic bank stakeholders. The development of an effective Islamic banking system that is able to develop competence to ensure sustainability without compromising Islamic value is the collective challenge to all participants in Islamic banks.

However, the effort of promoting and sustain Islamic banking operations is an ongoing effort where all participants including practitioners, Islamic banking scholars, regulators and other stakeholders in Islamic banks do have direct and indirect roles toward the continued development of Islamic banking concepts and practices.